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Fancy battery innovation is not just for electric car upstarts. The US toolmaker Stanley Black & Decker has released a hyped portable power system called Flexvolt where various saws and drills can be charged and used cordlessly. The accompanying media blitz includes blogs and social media influencers that rely on images of beefy men in hard hats and tool belts.

On Wednesday, Stanley announced another tools move — it would buy the power tool brands of Newell Brands, a conglomerate that is slimming down, for $1.95bn. The purchase price multiple is a healthy 13 times operating cash flow. Stanley says with cost savings it comes down just eight times, a figure below its own trading multiple.

But unlike Tesla, Stanley investors have demanded strong profits to back up its deals. The company has delivered impressive profit growth: its stock price doubled in the past five years and its market cap has reached nearly $20bn.

Stanley’s power and hand tools business accounts for two-thirds of the group revenue (its other segments are physical and electronic security, and industrial products such as fasteners). Half of the group’s business is in the US with another quarter in Europe. While the demand for tools is strong (organic growth was 8 per cent last quarter), Stanley’s operating margin of above 15 per cent has reached all-time highs.

Since 2000, when it began to bulk up and diversify, Stanley has boasted a total return of 400 per cent, citing its ability to manage costs and tightly manage working capital. Of late, its industrial peers have done just as well. Shares of Honeywell, Danaher, and Illinois Tool Works have all surpassed the performance of Stanley in the past five years. Industrials have broadly outperformed even with worries about slowing global economic growth and adverse currency movements. This deal may make sense but it is Stanley’s operational innovation that will make the difference.

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