Timken Case Study

4785 words 20 pages
TABLE OF CONTENT

Executive summary .................................................................................. 2
1. Introduction.......................................................................................... 3
2. Timken’s Expectations from Torrington .............................................. 3 2.1 Operational Synergies.................................................................... 4 2.2 Financial Synergies ........................................................................ 5
3. Valuation .............................................................................................. 5
4. Debt capital and its effect on Invest grade rating................................ 13 4.1 After
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It is consistent with the desire of the management to increase the market share within the global bearing industry. It is expected that after acquisition Timken would increase its penetration of the global bearing market from 7% to 11% (case).
Combination of different functional strengths: It is expected that the combined company will create more value for customers with a more complete product line and more effective new-product development. As Timken makes tapered roller bearings and Torrington produces needle roller bearings which has only 5% overlap in their products (case).
Greater pricing power: Timken’s cylindrical bearings and Torrington’s sophisticated needle-bearing solutions hoped to give competitive advantage to the company and expected to add enough value to increase the margin that lead to the higher growth in the profits.
2.2 Financial Synergies:
Cash Slack: As the company is hoping to take competitive advantage and expected to add enough value to increase the margin that would increase the revenues and cash inflow for the merged company.
Debt capacity: The management have concluded that the ideal capital structure needed to be a combination of debt and equity financing. As from last five years the company has only relied on the debt and they may be likely need more debt finance. Acquiring Torrington

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