Inside Out

Looks like the toy biz is in the midst of yet another retro trend. While the '80s brands are enjoying a revival, so are “mergers and acquisitions.” In the '80s, the trend was called Merger Mania (thank you, Ivan Boesky). Indeed, the total value of M&As spiked to almost $250 billion in 1988, from about $50 billion at the start of the decade. In 2004, however, the mini-merger mania wave seems to be a form of survival strategy, rather than an impact of positive business growth. This is especially true among mid-tier and specialty manufacturers looking to diversify their product lines so they won't have all their proverbial eggs in one basket. (This time around, though, no one seems to be straying from their “core competencies,” one of the big lessons learned from the last M&A go 'round. No toy manufacturer has yet bought a railroad, for example.) This most recent spree makes especially good sense in the current market. Even in an era of outsourcing, it apparently is still cheaper to buy than to build. In April, for example, Action Products purchased the assets of Curiosity Kits, adding crafts and activity kits to its play portfolio. A month later, RC2 acquired two independent companies, Playing Mantis, which enhanced RC2's collectible vehicles line, and The First Years, which enlarged its juvenile offerings. The acquisition marked the second and third purchase for RC2, formerly Racing Champions Ertl, in little more than a year; in 2003, the company had purchased Learning Curve. RC2's dual acquisition was followed by the Savon Team Sports purchase in May of 30-year-old specialty toymaker Small World Toys—which then became known as Small World Kids. That purchase was followed by an announcement last month that Small World would next acquire Neurosmith, a ground-breaking electronic toymaker. There will likely be other purchases for Small World, too. This past summer, Debra Fine, president and CEO, told Playthings that the company was on the acquisition trail, a term that hasn't been heard in awhile. So far, the beauty of these mergers, is that the buyers are making a point of keeping the brand names they acquire intact, alive and independent of the others under the company umbrella—unlike bigger companies that sometimes seem to swallow their acquisitions whole and are never heard from again. A good example of that phenom might be WowWee, which was purchased by Hasbro and then bought itself back; well, owner Richard Yanofsky actually bought it back. Now the company's Robosapien is being touted everywhere (score a few points for the good-old entrepreneurial spirit). Meanwhile, back in acquisition land, the deal between RC2 and First Years was completed last month; the First Years common stock ceased trading on the NASDAQ on Sept. 15.