Merger mania shakes control field now, may stabilize it later
The bigger they are… the better they can serve their customers, compete globally, and maybe control their destinies. That's the reasoning behind a recent epidemic of mergers and acquisitions in and outside the control and automation fields.In one of the most significant mergers, Danaher Corp.
The bigger they are… the better they can serve their customers, compete globally, and maybe control their destinies. That's the reasoning behind a recent epidemic of mergers and acquisitions in and outside the control and automation fields.
In one of the most significant mergers, Danaher Corp. (Washington, D.C.) agreed April 27 to buy Fluke Corp. (Everett, Wa.) for $625 million. Pending regulatory approval, Fluke shareholders are expected to receive 0.4524 shares of Danaher for each share of Fluke at the April 24 closing price of $33.39 per share.
Fluke officials say joining with Danaher will give them added international opportunities for Fluke's new and existing products, and that Fluke will also benefit from Danaher's experience in mergers and its complementary international presence. "Danaher has proven its ability in mergers and acquisitions, and this is one of the main ways that we too wanted to grow in the future," says Gary Ball, Fluke's investor relations manager. "Danaher also wanted to expand internationally, and Fluke is likely to form one of the largest segments of Danaher's international business."
Though the merger could eventually influence both companies' products, distribution, and customers, Mr. Ball added it's too early to tell precisely what those effects might be. "We know our customers will continue to see us where they've seen us before, and we may add new areas as our companies leverage each other's abilities," says Mr. Ball.
Similarly, the proposed $38-billion merger of Daimler-Benz AG (Stuttgart, Germany) and Chrysler Corp. (Auburn Hills, Mich.) could have extremely wide-ranging consequences. However, there seems to be little or no official assessment following their May 8 announcement on how their plants' control and automation systems and contracts might be affected.
Most observers say mergers are vital if control and automation companies and other businesses want to compete globally. However, some say firms acquire others to tie up market share and stifle competitors—which they claim is easier than truly innovating, growing new products independently, and nurturing new sales channels and markets.
Though the smoke hasn't cleared yet on the benefits and pitfalls of most recent mergers, many analysts agree that more consolidations are coming. Recent conglomerations have included Siebe plc's acquisition of Wonderware, Eurotherm's purchase of Action Instruments, and many others.
"I think there are going to be lot more mergers in our field, and that the pace of consolidation will accelerate," says Andy Chatha. president of Automation Research Corp. (Dedham, Mass.). "In the control and automation field it's essential for many companies to get bigger. This is because many customers don't want to buy from smaller firms. They want worldwide support.
"The current trend toward mergers is creating hard times for a lot of manufacturers. Technology is moving so fast that it's a challenge for even the biggest companies. And small firms that come up with highly innovative new technologies still need the sales and marketing channels to get their products out," he says.
DANAHER'S RECENT MOVES
The following is a summary of Danaher Corp.'s (Washington, D.C.) recently proposed and completed mergers and acquisitions:
Fluke Corp. (Everett, Wa.) for $625 million on April 27, 1998;
Pacific Scientific (Newport Beach, Calif.) for $460 million on Feb. 2, 1998;
Exide Electronics Group Inc. (Raleigh, N.C.) for an undisclosed sum on Oct. 2, 1997;
Gems Sensors Inc. (Plainville, Conn.) for an undisclosed amount on Aug. 29, 1997;
Acme-Cleveland Corp. (Pepper Pike, O.) for $200 million in June 1997;
Current Technology Inc. (Dallas, Tex.), a division of Buffton Corp., for $25.5 million on Feb. 18, 1997; and
Three China-based hand tool factories, a Tawain-based factory and distribution center, and a factory and distribution center near Dallas, Tex., for an undisclosed sum on Jan. 16, 1997.