In the process of seeking to become the nation's most important textile tycoon, Royal Little (1896-1989) created Textron, the nation's first modern conglomerate corporation, and set the pattern which scores of others followed.
Royal Little was born in Wakefield, Massachusetts, in 1896, into a family which wandered throughout the nation as his stepfather sought employment as a printer. Little's uncle, Arthur D. Little, the head of a prominent consulting firm which bore his name, was childless and in 1910 suggested that Royal return to Boston, become a member of his household, and eventually enter the business. The family agreed. In January 1911, Little was enrolled in a private school, and after graduation he went to Harvard to study engineering. Little interrupted his studies to serve as a lieutenant in World War I, but he returned after the war and completed the requirements for the degree.
Instead of entering his uncle's business, Little took a job as an apprentice at Cheney Brothers Silk Co. and from there went to a variety of other textile firms, followed by a stint at a Wall Street brokerage, where he learned finance. World War II found him in charge at Atlantic Rayon, which became Atlantic Parachute since it manufactured these for the Armed Services. In 1943 Little changed the name again, this time to Textron, signalling his intention to transform it into a major textile concern.
There are two ways for a company to grow: internally and through acquisitions. Little meant to expand his business, but in order to accelerate development he wanted to acquire other companies as well. So he purchased Manville-Jenckes, Lonsdale Co., Nashua Manufacturing, and several factories from Gossett Mills and Hoskins Inc. which were fashioned into Textron Southern, all within a three year span. In 1947 Textron reported sales of over $125 million, and Little appeared to have created his dreamed-of textile giant.
Textiles is a cyclical business, with recessions often following boom years, and this is what happened in 1948-1949. Little had gone through bad times during the interwar period, but had continued on in the same field. His experience with take-overs taught him a lesson—namely, that although growth through acquisitions was fine, he was purchasing the wrong kinds of firms. Therefore, while Textron would continue to acquire textile operations, it would in addition seek companies in other industries. In particular Little would seek out firms which might be improved through better management or investments or which offered financial benefits by means of utilizing portions of the federal tax code to increase earnings.
Finally, during this period the Justice Department and the courts were aggressively enforcing the anti-trust acts. Large companies which dominated single industries were at risk of being singled out for prosecution. Little hoped that Textron would grow into a major concern through representation in a variety of industries rather than through domination of a single one. While a textile giant might become a target for anti-trusters, a firm with interests in such diverse fields as aerospace, golf carts, zippers, pens, and jewelry— all of which Textron was to enter through acquisitions— would not.
Little started out in 1949 by purchasing Cleveland Pneumatic Tool, which would have had to pay a large tax bill because of profits made during the war were it not able to use these to offset losses elsewhere in the business. Since Textron had large losses in 1948-1949 it seemed an ideal partner: a Textron loss of $1 would be offset by a Cleveland Pneumatic Tool profit of $1.
It worked out fine, and Little proceeded to purchase Pathe Industries, which was involved with real estate and newsreels. Still interested in textiles, he next tried to buy American Woolen, a major company in the industry, which turned out badly. The bitter battle ended in a Textron victory, but in the process Little lost his taste for that business. He then abandoned textiles, eventually to rid himself of all involvement there, and became a conglomerator with a vengeance. Later on, he said his program had worked, "and that's how the so-called conglomerate trend got started in the United States."
During the 1950s and 1960s, Textron purchased more than a score of companies, including Dalmo Victor (radar antennas), MB Manufacturing (vibration eliminators), Kordite (plastic clotheslines and film), Camcar Screw & Manufacturing, Coquille Plywood, Benada Aluminum, Myrtle Point Veneer, and Federal Leather. Textron even acquired an old troop carrier which Little turned into a tourist ship. In 1960 Textron obtained Bell Aircraft, once a major defense contractor, which expanded greatly during the Vietnam War. After Little retired in 1960 the company continued to expand in this fashion, acquiring such well-known firms as Spiedel (watchbands), W. A. Scheaffer (writing implements), and Gorham Silverware.
By the early 1960s, Little had formulated his conglomerization rationale. Diversification, he said, eliminated the risks of the business cycle, since at any given time some companies were expanding while others were contracting. Thus the firm would never again experience anything as severe as the textile collapse of 1948-1949. Astute managers could shift assets from one company to another as needs dictated, which is to say that the earnings of subsidiaries with steady earnings which were not needed for expansion purposes could be shifted to rapidly-growing operations short of cash. Unlike many of the financiers of the 1980s, Little was firmly opposed to "raiding, " which is a take-over not welcomed by the management of the company acquired. Because of this, Textron often played the role of "white knight, " invited by companies under siege to make an offer for it so as to prevent acquisition by an unwanted suitor.
Little stepped down as chairman of Textron in 1960 and retired completely from the corporation two years later. By then it was one of America's top 100 companies with $550 million in revenues. Little dabbled in other firms, the most important of which was Narragansett Capital, which invested funds in young, small, promising companies, and he also joined a former colleague to form a consulting company, Little and Casler. In addition, he golfed and went on camera safaris. Always a droll individual with a sense of humor, Little found time to write his autobiography, which is entitled How to Lose $100, 000, 000 and Other Valuable Advice (1979). He died on January 10, 1989, at his home in Nassau in the Bahamas. Following his wishes, there was neither a funeral nor a memorial service. In his memoirs, he called funerals "a barbaric institution, " saying, I "hope my friends will just think I've taken a long trip."
Further Reading on Royal Little
In addition to his autobiography, Little's career is discussed in Robert Sobel, The Entrepreneurs: Explorations Within the American Business Tradition (1974) and Robert Sobel, The Rise and Fall of the Conglomerate Kings (1984). The conglomerate movement and Little's role in it are also discussed in Stan Sauerhaft, The Merger Game (1971) and Charles Gilbert, editor, The Making of a Conglomerate (1972). Little's obituary, by Eric Pace, is in the January 12th edition of the New York Times