AMETEK Acquires Taylor Hobson Holdings

AMETEK Inc. acquired Taylor Hobson Holdings, a leading manufacturer of sophisticated instruments used for ultra-precision surface profiling, in June from Permira, a U.K.-based private equity firm, through a cash transaction valued at nearly $95 million. AMETEK, a $2.25 billion market cap, diversified manufacturer of electronic instruments and electromechanical products headquartered in suburban Philadelphia, has been very successful in using a targeted acquisition program as a key element of its Corporate Growth Plan. Since the mid-1990s, AMETEK has consistently executed that growth plan, creating significant value for its shareholders. Since the beginning of 2000, AMETEK has generated a 28% compound annual growth rate in its stock price, outpacing its benchmark indices. The acquisition of Taylor Hobson, based in Leicester, England, is typical of the transactions consummated by AMETEK that have driven this increase in shareholder value. With approximately $70 million in annual revenue, Taylor Hobson is a global leader in ultra-precise surface measurement instruments, having introduced the first such instrument more than 60 years ago. More recently, Taylor Hobson has pioneered the development of instruments used to measure shapes and finishes at the sub-nanometer level. Manufacturers rely on its instruments to predict the useful life of products or improve their functional performance. The acquisition of Taylor Hobson reflects AMETEK’s focus on acquiring differentiated businesses in niche markets that complement its existing business portfolio or offer opportunities in higher-growth market segments. Taylor Hobson serves as an excellent example of AMETEK’s acquisition strategy at work. Taylor Hobson is a profitable, highly differentiated business involved in a variety of growth markets, including optics, semiconductors, hard disk drives and nanotechnology research. With its acquisition, AMETEK’s high-end analytical instruments business now totals more than $250 million in annual revenue. Equally important, it provides AMETEK valuable new growth opportunities in emerging markets. As part of its acquisition strategy, AMETEK generally seeks companies with annual revenues of between $30 and $100 million, with the right cultural fit and strong management teams. Taylor Hobson has a strong management team and excellent relationships with its customers. Its sales are geographically balanced with Asia accounting for 40% of the total, Europe a third, and the remainder divided between the United States and the rest of the world. AMETEK’s traditionally strong cash flow, augmented by its ability to prudently expand debt levels, provides it with significant flexibility to grow through acquisition. While historically focusing on “bolt-on” acquisitions for its current portfolio, AMETEK remains open to acquiring new growth platforms to augment that portfolio. AMETEK considers itself an experienced and disciplined acquirer and believes it has a core competence in conducting due diligence and integrating newly acquired businesses. That competency is attested to by the fact that its last 14 acquisitions, after one year of ownership, had an average increase in profitability of 31%, compared with the year prior to their acquisition. In the case of Taylor Hobson, AMETEK saw a great company that was well managed and with products that complemented its high-end analytical instruments business. AMETEK was able to pre-empt the auction process for the business, in part due to the economics of its bid but also because of its proven record of completing similar transactions in an expedited manner. The company remains actively focused on continuing its successful acquisition effort, and I encourage anyone considering the sale of a differentiated business in the analytical instruments, electromechanical products or other niche market to contact me. William Eginton Senior VP Corporate Development, AMETEK President, ACG Philadelphia [email protected] Copyright 2005 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com http://www.majournal.com