DANAHER- THE MAKING

OF A CONGLOMERATE

DEFINITION OF
CONGLOMERATE
A number of different things or parts that are
put or grouped together to form a whole but
remain distinct entities.

Aconglomerateis a combination of two or

more corporationsengaged in entirely different
businesses that fall under onecorporate group,
usually involving aparent companyand
manysubsidiaries. Often, a conglomerate is
amulti-industry company.

HISTORY OF DANAHER

Formed in 1984 by Steven and Mitchell Rales

It grew by targeting privately owned
companies with established brands,
proprietary technology, high market share
and room for improvement in operating
performance

It averaged 12 acquisitions per year

Acquisitions were concentrated in 4 areas:
Precision components(craftsman hand tools),
automotive and transportation,
instrumentation(retail petrol pumps) and
extruded products.

MOTIVATION FOR ACQUISITIONS

Danaher acquired a business only if it served
one of the two purposes;

Platform establishing transaction:

enabled
them to enter a new market. Used to enter
high growth market where the company
would gain competitive advantage through
operational excellence

Bolt on transaction: helped in the

strengthening of a pre-existing line. Used t
make existing businesses more competitive

BUSINESS UNITS IN DANAHER

Industrial Technologies segment

Motion- Control platform
Product Identification platform
Focused Niches ( aerospace and defense, sensors
and control)

Professional instrument segment

Environmental platform: Focused on water quality
customers and petroleum retailers
Electronic test and measurement platform: To boost
its single digit margin through cost cutting
innovation and quality

Tools and Component Segment

Mechanics hand tools platform: Was the core
business of Danaher and the emphasis was to make
it more competitive with significant subsequent
acquisitions

BUSINESS UNITS CONT..

Medical Technology Segment: formed to
respond to saturation and low growth rate in
its traditional platforms
Dental technology platform
Acute care platform
Pathology diagnostics platform
Life Science instrumentation platform

DANAHER ORGANIZATION
STRUCTURE

Corporate Teams
Based at HQ, includes deal making
specialists, finance and legal staff.
It controlled corporate strategy, deciding
which companies to acquire and in which
industries to invest
The HR and leadership development
facilitated identification, staffing , training
and progression of executives across the
entire company

ORGANIZATION STRUCTURE

DANAHER AQCUSITION
PROCESS

Deal Sourcing and due diligence.

Large acquisitions were initiated by the HQ, while the
bolt on transactions were initiated by the business units.

Criteria for acquisition.

Based on both strategic( market share leadership, brand
strength etc) and financial (price, EPS, free cashflows in
excess of earnings, etc) criteria.

Post-merger integration.
The team was charged with all decision making as well
as execution of plans regarding the target
They decided on who was to stay and who to absorb,
organized for training for new business units/hires,
assimilating product lines into the operations, searched
for ways to improve performance in the manufacturing
process, installation of Danahers own financial systems
within 60 days of acquisition.

ADVANTAGES
Risk spreading :Entering new products into
new markets offers protection against failure
of current products and markets.

High profit opportunities : Ability to move into

high growth profitable industries especially
important if current industry is in decline.

Escape from the present business if

competition is intense.

Better access to capital markets

Ease of accessibility to funds.

DISADVANTAGES

The dilution of shareholders earnings if diversification

is into growth industries with high P/E ratios.

Lack of a common identity and purpose in a

conglomerate organization. A conglomerate will be
successful only if it has high quality of management
and financial ability at head office where diverse
operations are brought together.

Failure in one business will drag down the rest.

Lack of management experience.

The extra layers of management increase costs

The complexity of a conglomerate's accounts make

them harder for managers, investors and regulators to
analyze, and makes it easier for management to hide
things

DRIVERS OF DANAHERS
GROWTH

Financial Muscle/ability. (Financial success).

Good reputation.
Strong governance structure that ensures
integration of the new companies acquired
takes place appropriately.

Strong organizational structure able to

support the various segments.

FUTURE OF DANAHER
Instead of growing artificially by acquiring
other companies Danaher should focus on
growing its own businesses i.e. starting from
scratch .

EXAMPLES OF CONGLOMERATES IN KENYA.

Name.

Nature of Business

Sameer

agriculture,manufacturing,distribution,
information technology,construction ,
transportation,finance

Nation Media
Group

broadcasting,publishing,television,printing

I&M Bank Group

banking,insurance,restaurants,bars

Transcentury

electric power,specialized engineering,

financial,transport
FMCG,publishing,automobiles,insurance,
building material,household
chemicals,
[4]
real
estate
specialized engineering

Centum
Limited
Olympia Capital
Holdings

THANK YOU