Danaher.docx

Divestiture - selling off subsidiary business

As we pursue our objective of becoming the most-innovative and lowest cost manufacturer of the products we offer, we are seeking a market position with each product line that is either first, second or within a very distinctive market niche

“If there’s one thing that distinguishes us from the other players in the M&A field, it’s that we stay in touch with the companies,” commented Steven Rales in 1986. After all, he added, “we’re reasonably young fellows with long time horizons

philosophy of kaizen—an approach that would ultimately become known as DBS, one of Danaher’s hallmarks

noticed early warning signs in the junk-bond market, prompting them to reduce their debt

The company began to “look at international opportunities for expansion both in terms of selling our products overseas and selective acquisitions.

It also began divesting those companies making tires, tools, and components for the auto industry, as Danaher had neither the brand identity nor the sufficient scale to withstand pricing pressures affecting the industry

Last, Sherman concentrated on “making fewer but larger acquisitions, many of them family-owned firms with good products and respectable market shares that were under-performing financially.”

Danaher also worked to expand and ingrain the continuous quality improvement techniques the founders had introduced. DBS came to

be understood as the keystone of the firm’s continual success. The investment community praised Sherman’s leadership, opining that, between 1990 and 2001, Danaher had emerged “from midcap company status to become the premier large-cap industrial company

Starting in the 27 mid-nineties, Culp noted, the company’s portfolio evolved toward “fewer, better businesses” by creating “platforms” based on a lead company with a strong position in an attractive market around which add-on acquisitions could be made. Danaher’s purchase of Fluke in 1998 was the first substantial acquisition that demonstrated the value in this approach

Danaher’s purchase of Fluke in 1998 was the first substantial acquisition that demonstrated the value in this approach

What they look for in acquisition? First, the market size should exceed $1 billion. Second, core market growth should be at least 5% 7% and without undue cyclicality or volatility. Third, [they] look for fragmented industries with a long tail for participants that have $2 5 $100 million in sales, and can be acquired for their products without necessarily needing their overheads. Fourth, [they] try to avoid outstanding competitors such as Toyota or Microsoft. Fifth, the target arena should present a good opportunity for applying DBS so that [they] can leverage [their] Danaher skill set. Last, [they]

look for tangible product centric businesses.

Diversification philosophy? they utilize their core competencies of the DBS system to create lean manufacturing and spread their knowledge to multiplefirmsthey acquire of which are at a smaller level and easier tointegrate.They participate in product market diversification because,not only are their products diversified, they alsoacquire businessesin several countries. Severalof their niche businesses fall into four categories: professional instrumentation, industrial technologies, tools and components, and medical technologies. Thesecategories are clearly a variety of distinct industries making Danaher’s diversification unrelated. Danaher expanded their strategy into “Western and Eastern Europe, Asia, Latin America, and the Middle East” (Hesterly)allowing them to be geographically diversified.

Based on the precision and success of the DBS, Danaher is trying to create synergy. DBS “requires every employee, from the janitor to the president, to find ways every day to improve the way works get done” (Hesterly). The system mandates every employee top-down to know every aspect of the business and allows them to input their suggestions on improvement. Management, including businesses that have been acquired, must go through training to learn the system. Top management even participate in “kaizen events”

Danaher is similar to GE in that their economies of scope are to create products that unrelated to one another. GE has products in aviation, health imaging, railroad engines, nuclear power plants and a broadcast station. Danaher has products medical technology, tools and components, environmental products, aerospace and defense, and industrial. They are all different industries which arehard and somewhat rare to find in businesses. Unrelated diversification is very expensive and a firm must have the capital to maintain the status. Danaher’s core competency and advantage is their knowledge of the DBS system and how to effectively integrate it into every acquisition they obtain. They have leverage compared to their competitors who have fallen behind

Plan, people, process, and performance are the four P’s of the DBS coveringthe four mainelements of the internal part of the business. The people categoryrepresents thetalent and experience that Danaherbring into the company, plan stands for the ‘what’ and the ‘how’ of the business, process is where you put the plan in action, and after the plan has taken placeyou get the results of the performance. To calculate the results of the performance Danaher Corporation uses the Policy Deployment tool