Lessons Security Companies of All Sizes Can Learn From Tyco-JCI Merger
Proper positioning and planning is important for every company, regardless of size.
Most deals include sellers who were not for sale and buyers who were not looking to buy.
As I read through the news Monday, I noticed that Tyco and Johnson Controls announced they will be merging operations in a monster transaction that will combine both of these global enterprises, resulting in a new and improved enterprise with annual revenue of $32 billion. Although this may be a poor example given the enormous size of this deal, it is a good example on why proper positioning and building of a quality organization is essential for companies of any size.
Both of these companies have enjoyed great success and will continue to do so. Despite their individual successes, they negotiated a merger. This deal did have another great advantage in tax benefits given Tyco’s current and what is stated to be continued global headquarters of Cork, Ireland. This deal is expected to bring many benefits including a reduction of approximately half a billion dollars over the first three years.
I maintain that fundamental practices apply no matter what your company size. You must operate each day as if it’s the day of an audit, keeping best practices in play, paying attention to top line income, expenses and bottom line revenue. Structure, approach to markets and efficiencies all play a great role toward a company earning a maximum return when they are ready to take some chips off the table.
Although size usually plays a role in whose team or infrastructure perseveres in a merger or acquisition, it is not always true. When a strong infrastructure and dynamic management team is in place and is really getting the job done, this is recognized. In some cases, a smaller or mid-sized company is eyed and courted primarily because they have an infrastructure and team that is hard to produce from scratch. Of course, the company also needs the revenue to support an attractive deal. This doesn’t mean that the company has to be on the block for sale; it’s been said that everyone is for sale, it’s simply the price that hasn’t been established.
RELATED: Tyco Could Have Fetched Higher Premium in JCI Deal, Analyst Says
Many transactions that I have personally been involved with and other deals that I have read about have a similar story. Many of these deals included sellers who were not for sale, buyers who were not looking to buy, or both. Never say never from either side of the table.
The industry is getting more interesting than ever before. I believe everybody can survive and prosper better than before as long as they keep their ear to the ground and allow themselves to adapt to the times. This doesn’t just mean selling a different camera or control. This could mean changing the complexion of your business radically, selling your company, acquiring someone or merging. These are just a few of the options and whether you are very small, midsized or very large, the rules apply to all.
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About the Author
Peter Giacalone
Peter Giacalone is President of Giacalone Associates, an independent security consulting firm.
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