TABLE OF CONTENT Executive summary .................................................................................. 2 1. Introduction.......................................................................................... 3 2. Timken’s Expectations from Torrington .............................................. 3 2.1 Operational Synergies.................................................................... 4 2.2 Financial Synergies ........................................................................ 5 3. Valuation .............................................................................................. 5 4. Debt capital and its effect on Invest grade rating................................ 13 4.1 After …show more content…
According to the researchers the increased value results from an opportunity to utilize a specialized resources which arises solely as a result of the merger (Jensens & Ruback, 1983; Bradle, Desai and Kim , 1983). For creating operational and financial synergies managers believe that two enterprises will be worth more if merged than if operates as two separate entities. Thus, the two companies, A and B: VA+B > VA + VB The principle of Value additively would refute this unless the amalgamation resulted in some form of synergy or more effective utilisation of the assets of the combined companies. According to this case, Timken has following expected operational and financial synergies after the Torrington’s acquisition: 2.1 Operational Synergies: Economies of scale: Timken has started consolidating operations into global business units to reduce costs. They have expected annual savings of $80 million by the end of 2007 after Torrington’s acquisition.(case) As large size is usually expected to yield production economies if manufacturing operations can be amalgamated, marketing economies if similar distribution channels can be utilised, and financial economies if size confers access of capital markets on more favourable terms.(book).Moreover, by reducing the combined sales forces, Timken expected to realize significant purchasing synergies by giving much large volume to a reduced list of suppliers in exchange for price reductions. One analyst estimated that those
Acquiring Torrington seems to fit well with Timken's long term growing strategy. Torrington and Timken share 80% of their customers but only overlap 5% in their product offerings. Not only would this allow customers to make Timken a one stop shop for many of their needs but also according to a survey done by the University of Michigan, companies that were integrated were more profitable than those who focused on only one good. Acquiring Torrington would help in their efforts of becoming more
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Omnicare, Inc., (NYSE: OCR) and CVS Health Corporation (NYSE: CVS), are two competitive firms in different industries. A press release announces that “CVS Health and Omnicare sign a definitive agreement for CVS Health to acquire Omnicare” ("CVS Health and Omnicare Sign a Definitive Agreement for CVS Health to Acquire Omnicare," 2015). The purpose of this paper is to discuss the merger of CVS and Omnicare. First, the paper describes the principal firms in the merger and the industry in which each operates. Secondly, the paper discusses the incentives to consolidate from the viewpoints of each firm. Thirdly, the writer explains the competitive environment in the industry and how it benefits the firms and society.
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The main weakness of merging the two companies would be with the staff. There would be cultural changes, disengaged staff and moral decreases (Iveybusinessjournal.com, 2015). Reorganization would need to be done to
A merger is a partial or total combination of two separate business firms and forming of a new one. There are predominantly two kinds of mergers: partial and complete. Partial merger usually involves the combination of joint ventures and inter-corporate stock purchases. Complete mergers are results in blending of identities and the creation of a single succeeding firm. (Hicks, 2012, p 491). Mergers in the healthcare sector, particularly horizontal hospital mergers wherein two or more hospitals merge into a single corporation, are increasing both in frequency and importance. (Gaughan, 2002). This paper is an attempt to study the impact of the merger of two competing healthcare organization and will also attempt to propose appropriate
With this acquisition, Timken could break into and dominate the European market and use it as the leverage to be the leader in bearing industry.
Acquisition is accretive for earning per share and Timken expects some cost savings through this acquisition. Timken should acquire to achieve the economies of scale, eliminate duplicate costs, achieve operating efficiencies.
Question 1 Several factors have been proposed as providing a rationale for mergers. Among the more prominent ones are (1) tax considerations, (2) diversification, (3)
When companies combine/merge the whole objective is to gain new opportunities, gain market share, grow the business, to become more innovative and to improve product offerings, utilizing/sharing the existing resources and data. From the case
What synergies, if any, can the Timken Company expect through its acquisition of Torrington? What are the risks?
Both companies operate and compete in same business and therefore, Timken is seeking substantial operating synergies from this largest acquisition in its history. The motive behind this acquisition is to add potential value to Timken by combining both firms, preferably from operational sources.
Timbuk2 was founded in 1989 by Rob Honeycutt, a San Francisco bike messenger. Honeycutt wanted to develop a messenger bag that was rugged enough for everyday wear and tear, but chic enough to set a fashion trend. The company founded its success based on its lean manufacturing and mass customization principles. With many of the American companies now outsourcing their manufacturing processes to China, it became hard for Timbuk2 executives to ignore the labor cost benefits that Chinese manufacturing would provide. Dealing with different channels (wholesale/retailers, e-commerce, etc), Timbuk2 also had to find a way to improve their mass customization processes and
With the proposed trivesture proposal, the company would lose synergistic value as three separate companies, compared to one large company. Examples of these include a number of overhead costs which gain economies of scale. In addition, ITT likely has synergistic revenues coming from the fact that it operates all three business segments. Analyst estimates indicate that the present value of the synergies whichh ITT stands to loose with the proposed trivesture have a NPV between $900 and
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