Use caution
In much the same way the company finds expertise outside
the company to fill knowledge gaps, it uses strategic acquisitions to gather additional expertise, products and markets.
There are a few things to watch out for in any acquisition,
and one of the most critical skills a leader needs to broker a
successful deal is the discipline to push away from the table
and say, “No, thanks.”
“It’s one of the hardest things in the world to do,” Timken
says. “When you talk about a company of our size doing billion-dollar deals, with the margin of error, you can’t afford to
make a mistake. The consequences are so significant for your
shareholders and for your people. You have to go in with your
eyes open, and you have to be willing to say, ‘Enough’s
enough.’ That discipline is what has kept us alive for 108
years.”
Understanding the company you are planning to acquire is
very important, but Timken also takes his managerial
instincts into account before closing the deal.
“It’s a combination of very good due diligence and gut feel,”
he says. “You can sit there and spend a lot of time going
through data rooms and talking to customer bases, but, at
the end of the day, the only way I get comfortable with an
acquisition is if my gut tells me it’s a good fit culturally.”
The first thing Timken does in that opening gut check is
decide whether he has faith in the people sitting across the
table from him. Values play a large part in this decision. If he
gets any sense that the leaders of the other company are willing to bend a few rules to get things done, the deal is off.
“Understand who you’re buying, understand the synergies
created by the two businesses, and don’t give them away in
the purchase price,” Timken says. “Our approach is always be
very meticulous in due diligence. Do as much pre-close integration planning as possible, and don’t pay too much. The
deals that blow up after close are really the result of somebody stretching too far to pay a price they can’t afford to
pay.”
There are many paths to going global, but the reality is, you
no longer have a choice. Change is coming. Those who
embrace globalization will be positioned to succeed. Those
who don’t will be in a tough fight.
“We are living in a world that is getting flatter, getting
smaller,” Timken says. “We compete with more people
around the world than we ever have in the past, and that creates a unique set of challenges that we as businesspeople
have to proactively address.
“That’s something our company has done reasonably well
in the last period of time. The pace of change will only
increase. If you look at the implications of rapid growth of
Asia on the global economy, I’m not sure we’ve seen the full
extent of the impact that’s going to have — whether that’s on
commodity pricing, who your customers are or who your
competitors are. It’s a very dynamic environment right now.
We all have to be flexible enough to deal with it, or you’re
dead.”
HOW TO REACH: The Timken Co., (330) 438-3000 or www.timken.com