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Rev. Dec. 9, 2013
PY
DANAHER—THE MAKING OF A CONGLOMERATE
CO
After joining Danaher Corporation (Danaher) in 1990, CEO H. Lawrence Culp helped
transform the company from an $845 million industrial goods manufacturer to a $12.6 billion
global conglomerate. Danaher’s 25-year history of acquisition-driven expansion had produced
healthy stock prices as well as above average growth and profitability for more than 20 years
(Exhibits 1 and 2); however, Wall Street had questioned the scalability of the company’s
corporate strategy and its reliance on acquisitions since mid-2007. Prudential Equity Group had
downgraded Danaher to underweight status, citing concerns over its inadequate organic growth.
Company History (1984–91)
NO
T
In 1984, Steven and Mitchell Rales had formed Danaher by investing in undervalued
manufacturing companies. The Rales brothers built Danaher by targeting family-owned or
privately held companies with established brands, proprietary technology, high market share, and
room for improvement in operating performance. Averaging 12 acquisitions per year (Exhibit
3), by 1986, Danaher was listed as a Fortune 500 company and held approximately 600 small
and midsize companies.
DO
Acquisitions were concentrated in four areas: precision components (Craftsman hand
tools), automotive and transportation (mechanics’ tools, tire changers), instrumentation (retail
petrol pumps), and extruded products (vinyl siding). As these businesses grew and gained critical
mass, Danaher used the term business unit to define any collection of similar businesses. Exhibit
4 provides a brief history of each of the original four businesses.
Restructuring
George Sherman was
crash of the LBO market in
operations rather than debt.
experiments, one of which
brought from Black & Decker as Danaher’s CEO following the
1988. Sherman decided to fund acquisitions through cash from
To generate the extra cash, Sherman encouraged a variety of
was the successful adoption of Toyota’s Lean manufacturing
This case was prepared by Sriram Nadathur (MBA ’09) and Professor L. J. Bourgeois III. It was written as a basis
for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright
 2010 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order
copies, send an e-mail to sales@dardenbusinesspublishing.com. No part of this publication may be reproduced,
stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic,
mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation.
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techniques, which Danaher subsequently applied across all holdings. Sherman also instituted
company-wide incentives to encourage managers at all levels to focus on cash.
PY
The combination of Lean manufacturing and cash management policies were organized
as the Danaher Business System (DBS). By improving all of its processes, Danaher became a
cash-generating machine able to buy more companies.
From Business Units to Strategic Platforms (1992–2009)
CO
By the mid-1990s, Danaher’s size and diversity exceeded its headquarters’ bandwidth, so
Danaher reorganized into four “market segments” and nine “strategic business platforms.”
Exhibit 5 shows Danaher’s market segments, strategic business platforms, and niche lines in
2009. From then on, Danaher acquired a business only if it served one of two purposes: (1) as a
platform-establishing transaction, where the target laid the foundation for Danaher to enter a new
industry; or (2) as a bolt-on transaction, where the target strengthened a preexisting line of
Danaher businesses.
NO
T
Platform-establishing transactions were used to enter high-growth markets where
Danaher could gain competitive advantage through operational excellence. Within each platform,
Danaher used bolt-on transactions to make existing businesses more competitive, either by
expanding products or increasing market coverage. In cases where adjacent acquisition
opportunities were not available, Danaher also maintained highly profitable “focused niche”
business lines. By the late 1990s, headquarters no longer was the sole initiator of deals as
platforms and business units also began to identify targets.
Danaher’s nine platforms were grouped into four segments: industrial technology;
professional instrumentation; tools and components; and medical technologies (Exhibit 5).
Exhibit 6 provides segment-by-segment financials.
DO
The following sections describe the evolution of the four segments and nine platforms.
Industrial Technologies Segment
Motion-control platform
Before platforms were established, in 1994 Danaher acquired Germany-based Hengstler
GmbH, a maker of counters and encoders. It then made acquisitions in instruments, switches,
controls, and test equipment for the telecommunications industry.
Danaher separated its motion-control business into a platform in 1998 with the
acquisition of Pacific Scientific for $420 million. In 2000, a series of bolt-on acquisitions added
robotics, wheelchairs, lift trucks, electric vehicles, and industrial motors.
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Product-identification platform
PY
The product-identification platform, started in 2002, designed, manufactured, and sold
commercial printing equipment to the packaging industry. Typical customers were food and
beverage companies, pharmaceutical firms, retailers, package and parcel delivery companies, and
commercial printers.
Focused niches
CO
By 2009, the industrial technologies segment also contained two focused niche
businesses: aerospace and defense, and sensors and controls for manufacturing.
The industrial technologies segment contributed 26% of Danaher’s revenues in 2008,
with 51% derived from outside the United States.1
Professional Instrument Segment
NO
Environmental platform
T
The professional instrument segment contained two strategic platforms: environmental
and test and measurement. The segment contributed 38% of Danaher’s revenues in 2008, with
57% generated internationally.
DO
The environmental platform focused on water-quality customers and petroleum retailers.
Danaher entered the water-quality arena in 1996 through the platform-establishing acquisition of
American Sigma. Forecasting a growing need for pure water for potable and industrial
applications, subsequent acquisitions manufactured a variety of instruments to analyze, disinfect,
and purify water. Customers included municipal drinking suppliers, wastewater treatment plants,
and third-party testing laboratories.2
Danaher already had a strong presence in the retail petroleum market with the VeederRoot acquisition in 1989 (Exhibit 3). With acquisitions in 2001 and 2002, Danaher built a
dominant position in the manufacturing and sale of fuel-dispensing technology. Its products
included leak detection, vapor recovery, retail automation, point-of-sale systems, and remote
monitoring services. Market penetration was so high that it was hard for anyone to fill a petrol
fuel tank without using a Danaher product.
Electronic test and measurement platform
The $625 million acquisition of Fluke Manufacturing in 1988, with its digital multimeters
and electronic test equipment, established a new platform. Danaher recognized Fluke’s
1
2
Danaher Corporation 10-K filing, 2008, 48.
Danaher Corporation 10-K filing, 2009, 5.
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exceptional business development and integration teams and quickly added 20 additional
acquisitions.
PY
Culp’s goal with Fluke was to boost its single-digit margin through cost-cutting,
innovation, and quality. Fluke became proficient at developing new products, executing product
refreshes, and delivering new applications with existing instruments. In addition, Culp redirected
Fluke’s R&D through the acquisition of companies with nascent technologies and developing
new applications for them. By rationalizing product lines, speeding up inventory turns, and
reducing floor space, Fluke’s margins more than doubled.
CO
In 2007, Danaher acquired Tektronix for $2.8 billion, doubling the size of the electronic
test and measurement platform. Tektronix made oscilloscopes and logic analyzers for measuring
the performance of electronic equipment used in semiconductor and electronics manufacturing.
Danaher improved profitability by downsizing, selling a subsidiary, cutting R&D, and scaling.
Tektronix headquarters in Beaverton, Oregon was converted into a lean and disciplined operation
with a strong bottom-line focus. For employees who had enjoyed Tektronix’s unique culture of
individual freedom, trust, and reliance on independent judgment, Danaher’s new management
philosophy came as a harsh change.
NO
T
By 2008, the test and measurement platform was Danaher’s largest with four primary
businesses: Fluke, Fluke Networks, Tektronix Instruments, and Tektronix Communications.3
Tools and Components Segment
Mechanics’ hand tools platform
DO
Tools and Components was Danaher’s core business. The acquisition of Armstrong
Brothers Tool Company and Delta Consolidated Industries in 1994 moved the company into
professional-grade tools, industrial tools, and tool storage equipment. With no significant
subsequent acquisitions, the hand tools platform shifted its emphasis to making existing
businesses more competitive.
While mechanics’ hand tools made up the single platform in the Tools and Components
segment, it also held four focused niche businesses: Delta Consolidated Industries, Hennessy
Industries, Jacobs Chuck Manufacturing Company, and Jacobs Vehicle Systems. Danaher
became the world’s largest producer of do-it-yourself hand tools and specialized auto-service
equipment, and all were category leaders.
The tools portfolio declined 6% through 2008 at $1.2 billion in revenue while
contributing 10% of total Danaher revenue, mostly in the United States.
3
Danaher Corporation 10-K filing, 2009, 6.
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Medical Technology Segment
PY
Medical Technology, the newest segment, was Danaher’s response to saturation and low
growth rates in its traditional platforms. By 2009, it had four platforms: dental, acute care,
pathology, and life sciences.
Dental technology platform
CO
In 2004, Danaher acquired a number of European dental companies and became the
second-largest dental products company in the world. It led in a number of markets, such as
orthodontic alignment brackets (braces), dental instruments, digital imaging, and restorative
materials. Because dental companies made custom products for individual patients, they
produced a lot of scrap. Danaher saw this as an opportunity for its factory-level kaizen method to
remove the scrap and improve fulfillment lead times. Danaher was not accustomed to the more
technologically-advanced dental companies, so it used its entry into dental technology as a
learning opportunity to expand DBS capabilities to include R&D and innovation management.
Acute care platform
NO
T
Danaher established its acute care business in 2004 when it bought Denmark’s
Radiometer for $750 million. Radiometer produced blood-gas diagnostic instruments4 used in
hospital emergency rooms and was supplemented with two other acquisitions.
Pathology diagnostics platform
The pathology diagnostics platform came into being with the acquisition of Leica
Microsystems in 2005, and, with subsequent acquisitions, established Danaher as a leading
global supplier of microscopes used by medical and research professionals.5
DO
Life sciences instrumentation platform
The acquisition of Leica led Danaher into the adjacent area of life-sciences
instrumentation. The addition of Vision Systems for $525 million in 2006 expanded Danaher’s
product offerings to automated specimen-preparation instruments for diagnostic/lab service
companies.
The medical-technologies segment represented 26% of Danaher’s 2008 revenues, 64% of
which was derived from international markets.
4
5
These instruments measured the concentration of oxygen and carbon dioxide in the arterial blood.
Danaher Corporation 10-K filing, 2009, 7.
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Organization
PY
Danaher’s organization was flexible enough to allow integration of large and small
acquisitions, both at the corporate and business unit level (Exhibits 7 and 8). While strategic
platforms became the basic building blocks, Danaher also had a mix of centralized functions,
headquartered in Washington, DC, and decentralized functions shared within each platform.
Corporate teams
CO
A small headquarters (HQ) team of approximately 50 included deal-making specialists
and finance and legal staff. The corporate office controlled Danaher’s corporate strategy,
deciding which companies to acquire and in which industries to invest. Corporate finance was
linked to the finance organization of each platform and these, in turn, were linked to the finance
teams for each business. The CFO also led a small corporate development team. Corporate
development worked with the general counsel and the legal team to identify and execute M&A
deals in addition to supporting, approving, or disapproving deals proposed by the finance and
business-development teams at the platform level. Corporate development also made the first
official offer to any approved target.
NO
T
Human resources and leadership development at HQ facilitated identification, staffing,
training, and progression of executives across the entire company. After an acquisition, corporate
HR installed executives at various positions within a target’s business. They ranged from
division presidents, to newly hired MBAs with specific mandates, to line managers, plant
managers, business development managers, and marketing managers. Because Danaher preferred
to promote from within, freshly hired MBAs and internal candidates identified for leadership
tracks were carefully developed, increasing the pool of Danaher-trained leaders available to work
on future acquisitions. Each business unit had its own HR team.
DO
There were two DBS-related functions at HQ: VP of training and VP of DBS. The VP of
training oversaw the training of new hires as well as personnel of acquired companies. All
employees, from intern to executive, were immersed in DBS for one to two weeks at the DBS
training center in Chicago before beginning their assignments. The VP of DBS was responsible
for improving the scope and applicability of management tools and systems within Danaher. This
team advised platforms, individual businesses, and the transition teams of new acquisitions.
While it was common practice in large organizations to use dedicated teams for Six Sigma
initiatives, Danaher expected every employee to internalize and work with DBS tools every day.
Emphasis was placed on a Lean mentality, which influenced the way employees interacted,
thought, and communicated within and across Danaher companies.
Corporate teams did not engage in running subsidiary companies; however, in order for
the DBS system to work efficiently, corporate teams had access to the operating metrics of each
platform and each subsidiary within the platform.
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Strategic business platforms
PY
Platforms were self-sustaining entities within Danaher and formed the basic building
blocks of the company (Exhibit 8). Strategic platforms were headed by executive vice
presidents, referred to as the group executives (GEs), between whom there was very little formal
interaction. Each platform was further organized into business lines. For example, the EVP and
GE of the dental platform oversaw its three business lines: dental consumables, dental hardware,
and laboratory equipment. Each business line had a “headquarters business,” typically the
original platform-establishing business within that line.
CO
Each headquarters business had its own business-development team, finance
organization, legal team, and other support functions. These resources empowered the business
senior VPs and presidents to propose acquisitions within their industries as well as make
operating decisions about their own subsidiaries. The business-development teams were staffed
with individuals experienced in acquisitions and finance as well as relatively inexperienced or
new MBAs. The subsidiary companies were tied to one of the headquarters businesses through a
president who had profit and loss responsibility for that subsidiary.
NO
T
A cross-functional integration team was formed within a platform whenever an
acquisition closed. Consisting of a mix of line managers, DBS experts, and finance and
marketing executives, it focused on transitioning the acquired company to the Danaher modus
operandi within a defined period, usually 12 months.6 The integration team had clear goals based
on DBS principles and was empowered to make operational, people, and product decisions.
Danaher acquired 11 companies in 2006 for $2.7 billion, 12 in 2007 for $3.6 billion, and
17 in 2008 for $423 million.7
DBS and Operating Philosophy
DO
DBS was the means by which dissimilar companies were assimilated, managed, and
evaluated. Starting as a factory-level Lean manufacturing system, DBS evolved into a
comprehensive management system that demanded rigorous, detail-oriented, and measurable
progress and accountability at every level, from the strategic decisions made at headquarters to
the day-to-day operating decisions made at the subsidiary level. The continuous-improvement
philosophy was applied across functions, from manufacturing to sales to product management to
human resources. The tools and training developed within the DBS rubric were versatile enough
to be deployed quickly at any newly acquired entity in any new industry.
DBS provided the tools to measure and guide key goals and activities relative to customer
goals concerning cost, quality, delivery, and innovation. At the operating level, foremen and
supervisors used DBS to track and measure the achievement of these goals at monthly, weekly,
6
7
Danaher Corporation 10-K filing, 2009, 79.
Danaher Corporation 10-K filing, 2009, 72–73.
-8-
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PY
daily, and, in some cases, hourly intervals. In a culture where everyone was held accountable for
results, DBS encouraged employees to take immediate action to resolve problems and to call on
any resource, without regard to bureaucratic and hierarchical considerations. Daniel Even,
president of Sybron Dental Specialties, provided an illustration of how DBS helped transform his
company in Exhibit 9.
Acquisition Process
Deal sourcing and due diligence
CO
Danaher built a demanding and hard-charging culture that emphasized results and the
unequivocal adoption of DBS. Exhibit 10 shows Danaher corporate values. While setting
stringent targets from the top, headquarters delegated responsibility, decentralized operations,
and drove accountability to multiple levels of the organization. Alignment was assured on three
levels: The goals of the subsidiary were tied to platform and corporate goals; leadership teams
were well trained in core DBS philosophy; and executives with operating experience in other
Danaher businesses were put in leadership positions in new acquisitions.
NO
T
Acquisition ideas came from both platforms and headquarters. Typically, large
acquisitions such as Tektronix and platform-establishing acquisitions were initiated by HQ,
while bolt-on transactions were usually initiated by the business unit. In the latter case, the
platform or business unit would draft an initial proposal to HQ with a rough evaluation of
potential synergies. If the corporate development team approved the proposal, a five-member
M&A team with members from both the corporate and business unit M&A groups would make
the first offer to the target. If the offer was accepted, the deal moved to the due diligence phase.
DO
Due diligence was performed by the business unit M&A team with input from proposing
managers. If sufficient synergistic opportunities were identified, the deal moved to valuation.
Following analysis and recommendations from business units, the corporate team decided on the
price. Corporate M&A had veto power over whether a proposal was pursued and could end the
process for a number of reasons such as lack of sufficient synergies or insufficient bandwidth
and resources to conduct due diligence. At times, businesses competed for time and attention
from the corporate development team, which occasionally created tension.
Criteria for acquisitions
Danaher made acquisitions based on both strategic and financial criteria (Exhibit 11),
screening companies for overall strategic fit, the likelihood that its DBS culture could be
successfully deployed, stable earnings, differentiated brands or technologies, and strong market
share of either bolt-on or platform-establishing transactions. Although bolt-on transactions were
expected to reach ROIC thresholds within three years, platform-establishing transactions were
allowed up to five years because of Danaher’s inexperience in new markets. It was not unusual
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for Danaher to bid against companies such as Honeywell, Cooper Industries, or GE, but, if
competitive bidding drove prices above Danaher’s limit, it would walk away.
PY
Postmerger Integration
CO
After a deal was valued, a business-unit integration team would take over from the fivemember business development team. The postmerger integration team was a mix of business
managers, DBS experts, up-and-coming-talent, and finance and marketing executives charged
with all decision making as well as execution of plans regarding the target. The team leader was
usually the individual most qualified and experienced in such integrations but not necessarily the
most senior. The integration team’s plans typically operated on multiple levels and across
multiple functions, including staff, product lines, manufacturing, and finance.
Executive staff
NO
T
Decisions about who stayed and who was let go were made on a case-by-case basis, and
terminations and retentions were announced on the day the deal closed. If Danaher was uncertain
about its ability to successfully train a target’s leadership team in its operating principles, top and
middle management positions were filled by existing Danaher employees. The acquired
company’s desirable executives were offered new or related positions and encouraged to stay.
Professional development and performance management plans were realigned with the Danaher
system, and incentive structures were linked to the achievement of newly devised business
priorities.
Nonexecutive staff
DO
The integration team moved in on the day of closing to brief new employees; typically, it
was the first time most heard about the purchase. Although input from the target might be used,
personnel decisions were usually made by the integration team. The process was either smooth
or rough depending on the goals of the seller (whether or not the CEO/owners wanted to retire
and cash out), Danaher’s goals, and the strength of the relationship between the integration team
and the subsidiary leaders. For nonexecutive staff, action was frequently drastic because support
functions were generally terminated. Engineers stayed, if a plant or site was retained, or given
the option to move if the product lines were integrated into a different business unit.
Training
To simplify postmerger work and allow Danaher to integrate the target company without
disrupting operations, the target’s senior and middle management spent time early on (sometimes
pre-merger) at the Chicago training center covering everything from kaizen events to policy
deployment, value-stream mapping, performance management, and ideas-to-innovation
(Danaher’s new organic growth initiative). DBS training would begin almost immediately for
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retained employees. For employees at newly acquired companies, the experience was sometimes
unforgiving (Exhibit 12).
PY
The DBS training model ensured that every new line manager was assigned to kaizen
events across the family of businesses to drive hands-on improvements, and, in the process,
learned Danaher’s culture, tools, and mindset. Each kaizen event was staffed with employees,
leaders of the subsidiary, and new MBAs. The team focused on identifying a customer issue and
fixing it in less than a week. It was not uncommon to see Larry Culp moving equipment around
the factory floor in the middle of a kaizen event.
CO
Product lines and brands
Manufacturing
T
The subsidiary brands were usually tied to one of the headquarters’ businesses. Danaher
always left the target brand intact, but a complete integration into the Danaher culture was a
must. If the acquisition filled a gap in the product portfolio, Danaher adopted a fold-in strategy,
assimilating product lines into its own operation while shedding the support infrastructure.
Danaher frequently rationalized products and, sometimes retained only some product lines while
jettisoning the rest of a company.
NO
Before a deal closed, Danaher executives toured plants and searched for ways to improve
performance, and after closing, drove these improvements through kaizen events. Crossfunctional teams, including managers and shift workers, coordinated reorganizing the factory and
establishing new production and tracking methods. Even the smallest operation was scrutinized,
be it the act of picking up a tool, the organization of parts, or the distance a worker moved to get
the product to the next stage of production. Cellular manufacturing techniques were a common
feature within Danaher plants, whereby managers and workers together determined the most
efficient way to perform every operation and eliminate waste.
DO
Finance and controls
Within 60 days of closing, Danaher’s own financial, personnel, and cost-accounting
systems were installed in the subsidiary, enabling the integration team to measure and track
synergies and carefully manage cash. Danaher set up reserves to cover anticipated closing costs
and rationalization opportunities, and, as a result, operating executives could focus on top-line
growth without worrying about profit and loss during integration.
The Path Forward
In March 2009, Culp wondered how to keep growing in the face of global economic
crises, new low-cost competitors, raw material price increases, and criticism from market
analysists.
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Exhibit 1
DANAHER—THE MAKING OF A CONGLOMERATE
T
CO
PY
Danaher (NYSE: DHR) Stock Price Performance (Adjusted for Splits), 2000–2008
DO
NO
Data sources: Danaher 10-K filing, 2008, and shareholder meeting prospectus.
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Exhibit 2
DANAHER—THE MAKING OF A CONGLOMERATE
Sales
Net Income
2008
12,697.46
1,317.63
2007
11,025.92
1,214.00
2006
9,466.06
2005
7,871.50
2004
6,889.30
2003
5,293.88
2002
4,577.23
2001
3,782.44
2000
1999
PY
Danaher Income Statement and Balance Sheets 10-Year Summary (year ended December 31)
Income Statement 10-Year Summary ($ in millions)
EPS
3.95
CO
3.72
3.44
885.61
2.73
746.00
2.30
536.83
1.69
434.14
1.39
297.67
1.00
3,777.78
324.21
1.11
3,197.24
261.62
0.90
NO
T
1,109.21
Balance Sheet 10-Year Summary ($ in millions)
Current
Assets
Current
Liabilities
Long-Term
Debt
Shares
Outstanding
17,458.03
7,649.47
2,553.17
318.4l
2007
17,471.94
8,386.25
3,395.76
318.0l
2006
12,864.1
6,219.49
2,422.86
308.2l
2005
9,163.11
4,082.76
857.77
305.6l
2004
8,493.89
3,874.21
925.54
308.9
2003
6,890.05
3,243.34
1,284.50
307.4
2002
6,029.15
3,019.55
1,197.42
305.1
2001
4,820.48
2,591.90
1,119.33
286.6
2000
4,031.68
2,089.35
713.56
284.0
1999
3,047.07
1,338.32
341.04
284.9
DO
2008
Data source: Danaher annual report, 2008.
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Exhibit 3
Y
P
DANAHER—THE MAKING OF A CONGLOMERATE
History of Acquisitions (partial list)
Year
1984
1984
1984
1985
1986
1986
1986
1987
1989
1989
1993
1994
1994
1994
1994
1995
1996
1996
1997
1998
1998
1999
1999
2000
2000
2000
Key Acquisitions
Dynapar
Mohawk Rubber Company
Master Shield Inc.
Danaher Tool Group
QualiTROL
Chicago Pneumatic
Western Pacific Industries
Ammco Tools Inc.
Easco Hand Tools, Inc.
Veeder-Root
Anderson Instrument Co.
Delta Consolidated Industries
Hengstler GmbH
Armstrong Brothers Tool Co.
Mark IV Industries
Joslyn Corporation
American Sigma
Acme-Cleveland
Gems Sensors & Controls
Fluke
Pacific Scientific Company
Atlast Copo Controls
Hach
American Precision Instruments
Kollmorgen Corporation
Warner Electric Company
Platform
Process and controls
Extruded products
Vinyl products
Tools and components
Process and controls
Tools and components
Tools and components
Automotive/transportation
Tools and components
Environmental—petroleum
Industrial control
Tools and components
Industrial control
Tools and components
Industrial control
Industrial control
Environmental—water
Industrial control
Industrial control
Test and measurement
Motion
Motion
Environmental—water
Motion
Motion
Motion
O
D
Description
Encoders for motor motion control
Automotive tire products
Building products
Mechanic hand-tools
Pressure gauge, diverse control instruments
Tools, instruments
Fasteners, screws, nuts, bolts
Wheel service equipment
Hand tools
Gas pumps and dispensers, retail automation
Instruments and controls for fluid processing
Tool storage equipment for trucks
Counter and encoder
Industrial hand-tools
Controls and Instrumentation division
Electrical apparatus and controls
Water quality monitors
Industrial control and telecom test equipment
Fluid sensors and controls
Electrical and industrial testing meters
Aircraft safety equipment
Servomotor, drive and control
Water analysis kits/instruments
Motors and actuators
Specialized servo and stepper motor systems
Linear positioning equipment
N
T
O
O
C
Price
Notes
Undisclosed
Undisclosed
Platform establishing
$60 million
$52 million
$170 million
Platform establishing
Undisclosed
$167 million
Platform establishing
$245 million
Undisclosed
$200 million
$147 million
$625 million
$420 million
Undisclosed
$325 million
$186 million
$267 million
$147 million
Platform establishing
Platform establishing
Platform establishing
-14-
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Exhibit 3 (continued)
Year
Key Acquisitions
Platform
Y
P
Description
Price
Notes
2000
5 small acquisitions in electronic and network test, aerospace, environmental controls, and water quality
2001
United Power Corporation (UPC)
Power conditioning
Uninterruptable power systems
2001
Red Jacket
Environmental—petroleum
Gas pumps and dispensers, retail automation
2001
11 small acquisitions in electronic and network test, aerospace, industrial controls, and water quality
2002
Thomson Industries
Motion
Linear motion-control products
$147 million
2002
Marconi (Videojet)
Product identification
Noncontact marking equipment
$400 million
2002
Viridor Instrumentation
Environmental—water
Water quality instrumentation
$137 million
2002
Gilbarco
Environmental—petroleum
Gas pumps and dispensers, retail automation
$309 million
2002
8 small acquisitions in process and environmental control segments
2003
Willett International Ltd.
Product identification
Packaging code products
Platform establishing
2003
Accu-Sort Systems, Inc.
Product identification
Packaging code products
Platform establishing
2003
10 small acquisitions in process and environmental segments
2004
Radiometer S/A
Medical technology
2004
Gendex (Dentsply)
Medical technology
2004
Kaltenbach & Voigt GmbH (KaVo) Medical technology
Dental diagnostic systems and lab equipment
$412 million
2004
$185 million
2005
Trojan Technologies
Environmental—water
Water disinfection and wastewater treatment
10 small acquisitions in medical technology, electronic test, motion, environmental, product identification,
sensors and controls, and aerospace and defense
Leica Microsystems AG
Medical technology
Surgical microscopes
2005
Linx Printing Technology PLC
$171 million
2005
11 small acquisitions in environmental and instrumentation segments
2004
O
D
T
O
N
Product identification
O
C
Critical care diagnostic instrumentation
$109 million
$108 million
Undisclosed
$343 million
Platform establishing
$166 million
$312 million
$684 million
Dental treatment equipment
High-speed printing applications
Platform establishing
$311 million
$550 million
$285 million
Life sciences—potential
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Exhibit 3 (continued)
Year
2006
2006
Key Acquisitions
Sybron Dental Specialties
Vision Systems Ltd
Platform
Medical technology
Medical technology
2006
2007
2007
ChemTreat
Techtronix
Environmental—water
Test and measurement
Y
P
Description
Diversified dental professional products
Life sciences instrumentation
O
C
Industrial water treatment products
Communication and signal-monitoring
devices
2007 10 small acquisitions in professional instrumentation, medical technologies, or industrial technologies
segments
Source: Created by case writer from Danaher annual reports, 2000–08 and 10-K filings.
T
O
O
D
N
Price
$2 billion
$525 million
$425 million
$2.8 billion
$273 million
Notes
To be paired with
Leica
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UVA-BP-0549
Exhibit 4
DANAHER—THE MAKING OF A CONGLOMERATE
PY
Danaher’s Original Businesses
CO
The precision components business unit, which later became the Danaher Tools and
Components segment, had its beginnings in 1986 when Danaher purchased Western Pacific
Industries, a manufacturer of fasteners and plastic products. In the first five years, the portfolio
was expanded through acquisitions, most significantly when Danaher was selected by Sears,
Roebuck & Co. to manufacture its Craftsman line of hand tools. Danaher also became the
leading supplier of tools to the National Automotive Parts Association (NAPA). The precision
and components subsidiaries came to manufacture such diverse products as Swiss screw machine
parts, the famous Allen wrench, and drill chucks. Precision components became Danaher’s
mainstay business and contributed up to 49% of overall revenues by 1991.
NO
T
Automotive and transportation holdings focused on professional auto mechanic tools and
transportation parts, considered to be a natural adjacency to the tools and precision products
business by virtue of similar production methods and selling processes. As with precision
components, this business unit continued to expand through several acquisitions including Coats,
Jacobs, Fayette, Ammco Tools Inc., and Hennessy, which added wheel serving products, engine
braking systems, tubular products, wheel balancers, tire changers, and brake repair components
to the automotive portfolio.
DO
The instrumentation business unit was created in 1984 with the acquisition of Dynapar
Corporation, a leading supplier of controllers to the industrial motor market. Danaher took the
lead in speed control and sensor products for electric motors and drives, and by 1986, three
additional acquisitions added pressure gauges, equipment protection devices, instruments, and
communication devices for transmission and distribution systems for the electric, water, and oil
and gas industries. Once expertise had been established in industrial controls, Danaher entered a
market using similar products—retail gas dispensing—by acquiring Veeder-Root in 1985. The
company supplied underground fuel storage sensors and instrumentation products to four out of
every five gas pumps worldwide. Subsequently, the instrumentation unit began to branch into
instrumentation and environmental controls. During the economic recession of 1989–93, the
environmental controls business became Danaher’s fastest-growing business, aided by stringent
regulation and increased demand for environmental products.
Danaher’s extruded products division began in such areas as plastics manufacturing,
rubber, and vinyl sidings; however, by the end of the 1980s, Danaher divested most of these
holdings.
Source: Created by case writer from Danaher 10-K filings.
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UVA-BP-0549
Exhibit 5
DANAHER—THE MAKING OF A CONGLOMERATE
DO
NO
T
CO
PY
Strategic Platforms and Niche Lines
Source: Created by case writer from Danaher 10-K filings.
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UVA-BP-0549
Exhibit 6
DANAHER—THE MAKING OF A CONGLOMERATE
$
2007
3,537.9
709.5
64.8
20.1
1.8
$
CO
Professional Instrumentation
Sales
Operating profit
Depreciation and amortization
Operating profit as a % of sales
Depreciation and amortization as a % of sales
PY
Danaher Segment Financials, Year Ended December 31
(dollars in millions)
$
T
Medical Technologies
Sales
Operating profit
Depreciation and amortization
Operating profit as a % of sales
Depreciation and amortization as a % of sales
NO
Industrial Technologies
Sales
Operating profit
Depreciation and amortization
Operating profit as a % of sales
Depreciation and amortization as a % of sales
DO
Tools & Components Selected Financial Data
Sales
Operating profit
Depreciation and amortization
Operating profit as a % of sales
Depreciation and amortization as a % of sales
Segment
Professional instrumentation
Medical technologies
Industrial technologies
Tools and components
$
2007
2,998.0
393.2
119.7
13.1
4.0
2007
3,153.4
532.5
63.2
16.9
2.0
2007
1,336.6
175.6
20.8
13.1
1.6
$
$
2006
2,906.5
625.6
48.8
21.5
1.7
2006
2,220.0
261.6
84.3
11.8%
3.8
2006
2,988.8
467.7
61.1
15.0
2.0
2006
1,350.8
194.1
21.4
14.4
1.6
Percentage of Total Sales
2007
2006
32
31
27
23
29
32
12
14
$
$
$
2005
2,600.6
538.3
47.8
20.7
1.8
2005
1,181.5
138.7
44.2
11.7
3.7
2005
2,794.9
409.3
60.4
14.6
2.2
2005
1,294.5
199.3
22.8
15.4
1.8
2005
33
15
36
16
-19-
UVA-BP-0549
Exhibit 6 (continued)
Percentage of Total Sales
$
NO
Depreciation and Amortization:
Professional instrumentation
Medical technologies
Industrial technologies
Tools and components
DO
Capital Expenditures, Gross
Professional instrumentation
Medical technologies
Industrial technologies
Tools and components
17,471.9
$
$
2005
2,589.0
2,408.6
3,158.9
785.8
220.8
12,864.2
$
9,163.1
1,286.7
1,489.7
829.0
214.8
4,566.0
$
784.2
1,482.3
832.5
238.7
2,881.8
$
794.9
855.2
897.3
240.9
1,294.4
$
8,386.2
$
6,219.5
$
4,082.8
64.8
119.7
63.2
20.8
268.5
$
48.8
84.3
61.2
21.4
215.7
$
47.8
44.2
60.4
22.8
175.2
39.0
47.6
48.0
20.9
$
34.5
31.6
44.7
25.6
$
$
$
$
Other
Data source: Danaher annual report, 2008.
2006
2,691.0
5,534.1
3,623.7
824.4
190.8
$
T
Liabilities:
Professional instrumentation
Medical technologies
Industrial technologies
Tools and components
Other
$
CO
$
2007
6,692.0
6,160.6
3,536.2
801.1
282.1
PY
Identifiable Assets:
Professional instrumentation
Medical technologies
Industrial technologies
Tools and components
Other
$
—
6.5
$
162.1
$
$
136.4
32.3
16.1
47.9
23.4
—
$
119.7
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UVA-BP-0549
Exhibit 7
Y
P
DANAHER—THE MAKING OF A CONGLOMERATE
Danaher Corporate Organization Structure
T
O
O
D
Source: Created by case writer.
N
O
C
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UVA-BP-0549
Exhibit 8
Y
P
DANAHER—THE MAKING OF A CONGLOMERATE
Danaher Platform Organization Structure
O
C
EVP and group
executive
SVP
Headquarter
Business A
President
Business 1
SVP
Headquarter
Business B
SVP
Headquarter
Business C
T
O
President
Business 2
President
Business 3
Finance
VP Operations
VP Marketing
VP Sales
Line Managers
N
Factory
Managers
O
D
Source: Created by case writer.
Product
managers
Business
Development
Legal
Other support
functions
Integration
team
Finance
Marketing
Operations
HR & Legal
DBS Experts
New MBA’s
-22-
UVA-BP-0549
Exhibit 9
DANAHER—THE MAKING OF A CONGLOMERATE
PY
DBS/Kaizen Case Study
Daniel Even, president of Sybron Dental Specialties, reflected on his experience
postacquisition to the editor of Dental Economics:
NO
T
CO
Our first kaizen was on the factory floor. We have a product, the clear ceramic
ortho bracket, which is very difficult to make. Any slight variation in the
manufacturing process causes the material to chip or fracture, and we end up with
a lot of scrap. Even though the materials to build this product are very expensive
and the time to build it is lengthy, it’s a very important product for us because
patients want braces that don’t show. This product is ground out of a block of
crystal; the crystal itself is actually grown. On top of that, it has to cure for a long
time. The entire process takes almost 24 days and takes up a lot of floor space.
During this kaizen, we literally reduced floor space by 30%, and we significantly
decreased the number of days it takes to build the part to six days. So, we ended
up with the same quality product but with less floor space and a faster delivery
time to the customer.
DO
Data source: Dental Economics, February 16, 2007.
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UVA-BP-0549
Exhibit 10
DANAHER—THE MAKING OF A CONGLOMERATE
PY
Danaher Corporate Values
The Best Team Wins
CO
Associates are our most valued assets.
We’re passionate about retaining, developing and recruiting the best talent available.
Danaher and its associates win because:
We are team-oriented with involvement by all.
We seek fact-based, root cause solutions; not blame.
We are accountable for results, and we deliver.
We are nonpolitical and not bureaucratic.
We have high integrity and respect for others.
Winning is fun!
Customers Talk, We Listen
NO
T
Quality First, ALWAYS!
We base our strategic plan on the voice-of-the-customer.
Robust, repeatable processes yield superior quality, delivery, and cost that satisfy our customers
beyond their expectations.
Continuous Improvement (Kaizen) Is Our Way of Life
The Danaher Business System IS our culture.
We aggressively and continuously eliminate waste in every facet of our business processes.
Leading Edge Innovation Defines Our Future1
DO
We continuously apply our creativity to the technologies of products, services, and processes.
Out-of-the box ideas, both large and small, add value to our enterprise.
We accomplish breakthroughs through the policy deployment process.
We Compete for Shareholders
Profits are important because they attract and retain loyal shareholders.
1
Danaher began to emphasize innovation in 2000.
-24-
UVA-BP-0549
Exhibit 10 (continued)
Danaher’s Corporate Mission
PY
We strive to create shareholder value through:
delivering sales growth, excluding the impact of acquired businesses, in excess of the
overall market growth for our products and services;

upper quartile financial performance compared to our peer companies; and

upper quartile cash flow generation from operations compared to our peer companies.
CO

To accomplish these goals, we use a set of tools and processes, known as the DANAHER
BUSINESS SYSTEM (DBS), designed to continuously improve business performance in the
critical areas of quality, delivery, cost, and innovation.
DO
NO
T
Data source: Danaher annual report, 2008.
-25-
UVA-BP-0549
Exhibit 11
DANAHER—THE MAKING OF A CONGLOMERATE
Strategic Considerations





DO
NO
Source: Created by case writer from public sources.
ROIC: 10% after tax within three years
EPS accretion
Free cash flows in excess of earnings
Assessment of cost structure
Price
CO
Industry fit (manufacturing, tools)
Cultural fit
Adoption of DBS
Bolt-on, platform-enhancing
Quality, delivery, and innovation
Market share leadership
Brand strength (goodwill)
Counter-cyclicality
Financial Considerations
T








PY
Danaher Acquisition Guidelines
-26-
UVA-BP-0549
Exhibit 12
DANAHER—THE MAKING OF A CONGLOMERATE
Reactions at Danaher
MBA on
leadership
development
track
PY
CO
They took over our private company preaching their DBS culture with no
respect for people. New managers took over and laid off the managers left at
the company. The rest left voluntarily. I would say, Danaher is a good
company, just look at the outstanding financial results, but their corporate
managers have gone too far, and they have not paid attention to the local
management.
DO
Current
employee
T
Current
employee
Our organization has embraced DBS. At the first kaizen, we became
believers at what we could accomplish through this methodology. The
experience is incredibly exciting because of the impact we see within the first
couple of hours of a kaizen. We actually move things on the floor and see
results very quickly, which builds an incredible amount of momentum. As
people see the results, they become more engaged. We end up working long
hours because we’re so eager to get to the finish line and implement the tools
to their fullest extent. It’s very energizing and exciting and high impact.
It has become impossible for management within Danaher company to make
any decisions or “run” their company on their own. The corporate
management is micromanaging everything! The spread of funds over ALL
companies makes it difficult to do anything when you could be doing better
on your own.
Danaher provides a place to grow and improve as the company is all about
growth and continuous improvement. The company relies on self-motivated
leaders to define their own path and forge ahead smartly to achieve whatever
they want. Danaher provides tools and frameworks for you to achieve, but if
you need structure, this is not the place for you. If you want to create/find
opportunity and develop it into a profitable growth business, look here. The
growth of your responsibility is only limited by your ability to produce
results.
NO
Group/platform
executive
Manager
Manager
Danaher corporate has a lot of good ideas and really tries to incorporate the
companies they purchase into the DBS; however, old management has a hard
time correctly adapting the DBS concepts and quickly delegates blame to
cover up its own mistakes.
Danaher must become more customer focused and less focused on monthly
revenue. Place more emphasis on new product development and stop trying
to suck more income out of old products.
Data source: http://www.glassdoor.com/Reviews/Danaher-Reviews-E193.htm.