Danaher Case Study
Serial Acquirer Case Study: Danaher Corporation
August 2010
New York One Penn Plaza, 36th Floor New York, NY 10119
Preliminary and subject to further review and change. See final page for important information about this document. Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.
Overview
• Despite the claim that acquisitions destroy value certain companies excel as acquirers and deliver outstanding value for shareholders. • We studied the relationship between long term total shareholder returns (TSR) and different acquisition strategies and a variety of deal characteristics. – The only trait that consistently has a strong positive relationship with long term TSR across each industry is acquisition frequency. • We call them Serial Acquirers and many generate outstanding results by being better at planning, executing and integrating acquisitions than their peers.
• Danaher Corporation is one of the world’s best serial acquirers
Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.
2
Danaher’s M&A Strategy Emphasizes Returns
Danaher's Fundamental Performance $1,600 16%
$1,200
12%
• Even during the downturn in 2008 and 2009 Danaher delivered Cash Flow in excess of the required return on all capital • This strategy creates value for shareholders and demonstrates the benefits of continuously redeploying capital into positive returns
$800
8%
$400
4%
$0
0%
1997
1999
2001
2002
2003
2004
2006
2008
1996
1998
2000
2005
2007
Acquisition Residual Cash Earnings
Acquisition Residual Cash Margin
Source: Fortuna Advisors Analytics, using CapitalIQ Data Note: Acquisition Residual Cash Earnings (ARCE) is EBITDA + Rent + R&D Less Taxes Less Capital Charge Including Goodwill & Intangibles Acquisitions Residual Cash Margin (ARCM) is ARCE as a % of Revenue
Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.
3
2009
Danaher Creates Value Through Superior Returns
August 2010
New York One Penn Plaza, 36th Floor New York, NY 10119
Preliminary and subject to further review and change. See final page for important information about this document. Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.
Overview
• Despite the claim that acquisitions destroy value certain companies excel as acquirers and deliver outstanding value for shareholders. • We studied the relationship between long term total shareholder returns (TSR) and different acquisition strategies and a variety of deal characteristics. – The only trait that consistently has a strong positive relationship with long term TSR across each industry is acquisition frequency. • We call them Serial Acquirers and many generate outstanding results by being better at planning, executing and integrating acquisitions than their peers.
• Danaher Corporation is one of the world’s best serial acquirers
Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.
2
Danaher’s M&A Strategy Emphasizes Returns
Danaher's Fundamental Performance $1,600 16%
$1,200
12%
• Even during the downturn in 2008 and 2009 Danaher delivered Cash Flow in excess of the required return on all capital • This strategy creates value for shareholders and demonstrates the benefits of continuously redeploying capital into positive returns
$800
8%
$400
4%
$0
0%
1997
1999
2001
2002
2003
2004
2006
2008
1996
1998
2000
2005
2007
Acquisition Residual Cash Earnings
Acquisition Residual Cash Margin
Source: Fortuna Advisors Analytics, using CapitalIQ Data Note: Acquisition Residual Cash Earnings (ARCE) is EBITDA + Rent + R&D Less Taxes Less Capital Charge Including Goodwill & Intangibles Acquisitions Residual Cash Margin (ARCM) is ARCE as a % of Revenue
Copyright 2010 Fortuna Advisors LLC. All Rights Reserved.
3
2009
Danaher Creates Value Through Superior Returns