Case Study Of Timken

There are various categories of banking; these include retail banking, directly dealing with small businesses and persons. Commercial and Corporate banking which offers services to medium and large businesses (Koch & MacDonald 2010). Private banking, deals with individuals, offering them one on one service. The last category is investment banking. These help clients to raise capital and often invest in financial markets. Most global banking institutions provide all these services combined. With all these institutions in existence within the same localities and offering similar services, there is a need to regulate the industry so as to protect the consumer and provide fair working environment for all banks (Du & Girma, 2011).

For the corporation that has acquired another company, merged with another company, or been acquired by another company, evaluate the strategy that led to the merger or acquisition to determine whether or not this merger or acquisition was a wise choice. Justify your opinion.

This memo will examine Timken Company's decision to acquire Torrington by examining the stand-alone value of Torrington, the synergies of this acquisition and the effect on Timken's investment grading.

With this acquisition, Timken could break into and dominate the European market and use it as the leverage to be the leader in bearing industry.

The principle of Value additively would refute this unless the amalgamation resulted in some form of synergy or more effective utilisation of the assets of the combined companies. According to this case, Timken has following expected operational and financial synergies after the Torrington’s acquisition:

MRC, Inc. is a Cleveland based manufacturing company specialized in power brake systems for trucks, buses, and automobiles; industrial furnaces and heat treating equipment; and automobile, truck and bus frames. As till 1957 most of MRC's sales were made to less than a dozen large companies in the automotive industry, it was exposed to the risk inherent in selling to a few customers in a very cyclical and competitive market. To minimize the risk and to explore new business opportunity MRC's management decided to diversify their business operation. After their fifth successful acquisition, the CEO of MRC Archibald Brinton faced with a dilemma of whether to buy American Rayon, Inc.

Thus, each bank needs to differentiate their product offers to customer, strengthen their portfolio, and improve services, etc depending on its strategies.

My recommendation is for the company to stay focused on its main competitive advantage of supplying a

Banks take deposits from savers and pay interest on these accounts. They receive interest on loans when they pass these funds on to borrowers. The spread between the rate they pay for funds and the rate they receive from borrowers is where their profits are derived from. This practice of combining deposits from many sources which can be lent to many borrowers forms a interchange of funds

and the sale of noncore assets were common. Moreover, in anticipation of sluggish sales in the

Both companies operate and compete in same business and therefore, Timken is seeking substantial operating synergies from this largest acquisition in its history. The motive behind this acquisition is to add potential value to Timken by combining both firms, preferably from operational sources.

They have been able to generate different sources of revenues through commercial banking, credit card and retail financial services, which separates them from competing with some investment banking companies. The accounts, products and features the company offers sometimes have fees which it is willing to waive. Since the company wants the “share of wallet” of high balanced customers, it will take such actions. This action of course has the potential to deepen relationships. In the article by author Charles Keenen he states, “According to Bancography, a consulting firm in Birmingham, Ala., a customer who has just one product with a bank will stick with that bank for about 18 months, but add even one product - a savings account, perhaps - and the average jumps to four years. Customers with three products will stay with the bank for about 6.8 years.”

It is aimed at the broad mass market and involves the creation of a product or service that is perceived unique throughout the industry. The company or

Analysts estimate that the $80 million in cost saving could be realized after the acquisition , however certain other costs associated with the integration approximately $130 million would occur .Hence, I take these cost savings and integration costs into consideration for the with-synergies valuation. Incorporating the effects of 80million cost savings for the merged firm (to be achieved by end of 2007 and assumed to incur in perpetuity then on) and 130 million integration costs (half of this accounted at the beginning years) in the estimated EBITs for Torrington, a new horizon value is estimated, the new FCF is discounted by acquiring company’s WACC 8.39%. Torrington company’s with- synergies valuation $1386.38 million exceeds the value as a stand-alone entity by approximately $286 million. sheet2: With-synergies Valuation of Torrington-DCF Method.

All industries need raw materials as inputs to their process. This includes labor for some companies, and parts and components for others. This is an essential function that requires solid buyer and seller relationships. If there are fewer suppliers or if they have certain strengths and knowledge, then they may control significant power over the industry. Threat of substitute is also high, there are more than enough B&R bearing companies out there willing to increase their customer base and if a certain company isn’t producing up to par, than customers will have no problem finding another supplier to satisfy their needs. Bargaining power of buyer will be high due to the increasing number of competitors who are willing to compete for their business and the increasing amount of substitute products available. Buyers tend to have more power when there are many suppliers in the industry and the products are standardized. Rivalry among competition will most likely be the most crucial force affecting Timken due to the high demand for ball bearings in industrializing countries and opportunities available to those companies who are successful in this market. Timken’s competitive edge is in its superior product quality.