3Q. How related are the new businesses Cooper enters into?
Strategy for Acquisition employed by Cooper can be described as below:
1. Industry where Cooper could become a leader and promotes its Brand Value
2. Stable industry with stable earnings
3. Acquire any and only leading companies in their respective market segments
4. Those companies having strong assets
5. Had proven manufacturing operations using well-known technologies
6. Companies which had broader customer base – to serve and reach out to more people
Ideas and motivation for their new businesses strategy:
• Diversification that would help in
? Long term growth
? Maintaining Earnings per share with acquiring new companies
? Acquiring those companies that continue Cooper Strategy of improving market share
? Wants friendly takeover and maintain synergies between the 2 companies
? Make acquisitions that deliver operating and financial synergies
? Ownership but joint control
? Have a fair deal with the other parties and avoid pay mismatch.
Introduction & History:
• 1919: Cooper Industries was started
• 1950s: Established as small yet reputable maker of engines & compressors (to propel natural gas through pipelines)
• 1958: Suffered a cyclical downturn
• 1960s: Expansion decision to minimize dependence on cyclical natural gas business
• Cooperization: They were on a mission to expand thereby increasing size and scope of Cooper Industries dramatically.
• The important fact is that with lesser market fluctuations in their sales, hand tools would help Cooper level its Cyclical revenues.
• 1970-1988 – Cooper divested into 33 businesses
• Most of the mergers so far were complementary to their existing or core business.
• During 1970 , Cooper decided to diversify their merger to Airmotive industry, later into the energy industry
• 1979 – One of the major acquisitions was to purchase Gardener- Denver , machinery manufacturer for petroleum exploration, mining and general construction. This was found to be a complementary move
• 1981- Acquisition of an electrical company Crouse-Hinds. This gave a better positioning of Cooper with its market share in electrical and electronic industry. This was found to be a Diversification move
? CEO had described this to be “the true diversification move, while that of Gardner-Denver was a complementary move”.
• In late 1980’s Cooper was a well-established broadly diversified manufacturer for electrical, general industrial products and energy-related machinery.
In the distribution and control area, they dominated the market. They also did sell off some of the companies, which was not found to have much future growth which establishes the type of acquisitions and mergers that Coopers were interested in.