Executive Summary United Technology Corporation’s (UTC) offer for Rockwell Collins reflects UTC’s history of using merger and acquisition for strategic re-positioning. While expensive, a successful transaction should place UTC in an enviable market position among aerospace suppliers. The Deal On September 4th, 2017 United Technologies Corporation (UTC), one of the world’s largest precision manufacturers, announced it would buy Rockwell Collins for $30 billion in cash, stock, and assumed debt. Some criticized the deal as too expensive and brought on by the threat of activist investors pressuring UTC management for better performance. A longer term look shows the Rockwell Collins deal is the latest action in a disciplined M&A strategy that should continue to refresh UTC’s prospects for decades to come. Precision manufacturers of all sizes can learn from UTC on how to effectively sell and buy businesses with an eye to long-term performance. For some time UTC has faced complaints from shareholders for underperforming other industrial firms. There is some truth to the complaint: Source: ChartIQ. Since 2011, UTC shares lagged the broad market. Why? Lack of growth. The company, net of discontinued operations, grew revenues at a gentle 2.4% per year. Profitability similarly lagged, primarily due to the decline in US military spending. Three separate deals reflect UTC’s attempts to expand in the more desirable commercial aerospace markets. Goodrich In 2011 UTC acquired Goodrich for $18 billion. Out of the tire business for years, Goodrich’s $8 billion in annual sales come from landing systems, one of nine core technologies found in most aircraft. At the time of the deal, Wall Street pilloried UTC management for paying too much. Hindsight shows that, though expensive, Goodrich (now part of UTC Aerospace Systems) is a highly profitable contributor to UTC. So, a step in the right direction. Sikorsky Sale In 2015 UTC…
News/Reports
Medical Product Outsourcing (MPO) has published its annual report on the Top 30 companies in the Global Medical Device marketplace. The ranking of companies includes reporting on industry trends of the past year. The piece features Tony Freeman’s insights on the performance of Medtronic, Johnson & Johnson, Becton, Dickinson and Company, and Stryker.
MedPlast, Inc. announced it has acquired Coastal Life Technologies (CLT), a San Antonio, TX, contact manufacturer, assembler, and kitter of medical devices and procedure sets. Financial terms were not announced. The acquisition by private equity-backed MedPlast compliments MedPlast’s acquisition of Vention Medical’s Device Manufacturing Services earlier this year. A.S. Freeman Analysis: MedPlast’s acquisitions give the company the scale and range of services perceived as necessary to hold direct-to-OEM relationships. The acquisition of CLT expands MedPlast’s capabilities to offer complete devices as well as manage inventories for customers. Increasingly, contract manufacturers are rounding out there offerings to ensure they can deliver a complete device directly to the marketplace. For more information on the transaction please go to PR Newswire .
After twelve years as Managing Director of Manning Advisors I am pleased to announce the formation of A.S. Freeman Advisors, LLC based in New York City. A.S. Freeman provides merger and acquisition advisory services to specialty materials, specialty chemicals, and precision manufacturing companies around the world. In addition, A.S. Freeman offers strategic consulting services to firms valuing companies and markets. This is an exciting time in the high-value manufacturing markets. Value creation, new fields, and evolving economics are topics executives must consider as they guide their companies. A.S. Freeman provides the external perspective managers often require. Please get in touch to learn more about our offerings and experience. I look forward to speaking. Best regards, Tony Anthony S. Freeman President A.S. Freeman Advisors, LLC www.asfreeman.com (917) 868-0772 direct