Bombardier Transportation & the Adtranz Acquisition Essay Example for Free

Bombardier Transportation the Adtranz Acquisition EssayBombardier had evolved from its humble beginnings as a snowmobile manufacturing business based in Joseph-Arman an Bombardiers garage to a global business in which its once core recreational products were over shadowed, on a revenue basis at least, by its offerings in transportation, aerospace, and capital. In every segment in which the company operated it was either number 1 or 2 globally. This was non the case for the Transportation group (BT) in Europe, where in 2001 it sat in fourth send off behind Alstom, Siemens and Adtranz (AT). However, the AT acquisition presented the opportunity to vault BT to the forefront of the industry. At a set tag of US$715 million (23% of ATs 2000 revenue) AT was a bargain and an opportunity outlay considering for several reasonsRevenue Growth Unlike all other Bombardier businesses, BTs revenue was counter-cyclical so developing in the sector would provide better balance to its overall revenue (Figure C1 in Appendix C).With the step-up of AT, BTs annual rail-related revenue could grow to US$7.6 billion in 2001 (up from US$2.2 billion in 2000) with a backlog of US$14.5 billion. 1While BT was a low margin business it was a cash generator that helped to finance other Bombardier businesses.Geographic Expansion AT had a presence in a broader range of European markets and the region was viewed as the center of technological development. Asia and South America apply European engineering and practices so AT provided BT better access to future markets.Completion of Product Portfolio BT lacked actuation system and train controls competence. This had been mitigated by outsourcing to rivals and suppliers however it was a competitive weakness as was exemplified by ATs exclusion from a key deal in the UK in 2000. AT excelled in these areas, and provided immediate cost synergies and long term strategic strength. Naturally the acquisition was not without its downside. There we re many a(prenominal) aspects of the deal that warranted considerationAcquisition SizeWhile BT had a successfully track record of acquisitions it had never integrated a company of ATs size. Based on 2000 figures, AT had nearly 40% more employees, just under 50%more in sales, and operated in 60 locales. The differing company structures were also of concern.Financial PerformanceAT posted net losses going back 4 historic period in spite of restructurings. Even at a bargain purchase price, an unsuccessful integration could exist BTs income and cash flow.Due DiligenceAT was understandably reticent to let a competitor gain full access to its books should the deal not complete, so BTs diligence process was not comprehensive. Furthermore BTs European management had not participated in the deal only amplifying the potential risks. node LossThe acquisition could trigger the loss of customers or new contracts. Additionally, AT had earned a disposition for poor production and servicing tha t competitors could exploit.A comprehensive plan would be required to realize the project synergies, tackle the above noted concerns, and should the deal clear anticipate and address regulator stipulations.