1) How does Torrington fit with The Timken Company? What are the expected synergies?
Timken, is the inventor of the tapered roller bearing, and Torrington, the pioneer and leading global producer of needle roller bearings, have only a 5% overlap in their product offerings; together would make Timken a formidable company. The acquisition of Torrington will substantially broaden Timken’s product portfolio and enable deeper penetration of the global market. After the acquisition Timken will be listed in the list of top 100 suppliers to the Automobile industry. For other industries, the acquisition will enable Timken to provide a broadened base of technology, market and applications knowledge for customers and distributors globally.
One important result will be more integrated engineering solutions for new original equipment designs and the opening up of new market segments for the company. With 80% overlap in customers and only 5% overlap in products, Timken after the acquisition would be able to bundle more products helping its customers reduce the number of suppliers they dealt with and differentiate itself from the competition The acquisition would help fortify Timken’s image as a worldwide leader in the bearing industry in the investors mind. Timken expects $80 millon in cost yearly cost savings including savings from reducing its combined sales force. It also expects the following synergies:
Operational Synergy – Timken could possibly combine manufacturing facilities, share best practices and intellectual property. Timken also expects to realize significant purchasing synergies by giving much larger volume to a reduced list of suppliers in exchange for price reductions. ‘The combined company’s engineering expertise will enable their customers to benefit from innovative new products and leading-edge components to further enhance their competitive positions.
Financial Synergy – The acquisition will give them access to a larger market increasing their yearly revenue and making them a stronger player in the market. If they can acquire Torrington at a fair price the investors would definitely view them as a safer investment and this should cause their stock prices to rise.
Managerial Synergy –The acquisition would result in the combination of more than 100 years of bearing manufacturing and development experience. They could share and combine their expertise to manage and operate the company more efficiently.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 7 January 2017
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