3M may be best known by Maryland residents for Scotch tape and Post-it notes. The company also makes personal protective gear. Therefore, it may make sense that it would make such a large investment to purchase Capital Safety, which also makes protective gear.
Capital Safety produces and sells lanyards, harnesses and other safety gear for the industrial, mining and construction industries. These products will be added to 3M's respirators, safety apparel and protective eyewear. It is anticipated that the marriage of 3M's technology with Capital Safety's products will produce better and safer products. 3M is purchasing the company for what it believes is the bargain price of $1.8 billion.
3M reports that the market for personal protective gear brings in over $25 billion around the world and is projected to rise each year by three to four percent. The fall-protection equipment that Capital Safety manufactures brings in approximately $1.6 billion per year and is projected to rise at least five percent, according to 3M. However, the reported earnings of the company for its latest fiscal year were just $430 million.
3M may be making this large investment based -- at least in part -- on its market projections. This is at least one criteria that most Maryland businesses would use in considering acquiring another company. Other business and legal issues need to be explored before a final decision is made to purchase another company, which will more than likely require the advice and assistance of an attorney familiar with the complexities of mergers and acquisitions.
Source: Reuters, "3M strikes biggest-ever deal for KKR's Capital Safety", Lewis Krauskopf, June 23, 2015