Bombardier Transportation & the Adtranz Acquisition Essay

Bombardier had evolved from its humble beginnings as a snowmobile manufacturer establish in Joseph-Arman an Bombardiers garage to a global subscriber line 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 not the case for the Transportation group (BT) in Europe, where in 2001 it sat in fourth place behind Alstom, Siemens and Adtranz (AT). However, the AT acquisition presented the opportunity to vault BT to the forefront of the industry. At a expense tag of US$715 million (23% of ATs 2000 revenue) AT was a bargain and an opportunity worth considering for several reasonsRevenue Growth strange all other Bombardier businesses, BTs revenue was counter-cyclical so growth in the sector would provide better balance to its overall revenue (Figure C1 in Appendix C).With the addition of AT, BTs an nual rail-related revenue could grow to US$7.6 billion in 2001 (up from US$2.2 billion in 2000) with a reticence 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 involution 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 utilize European engineering and practices so AT provided BT better access to succeeding(a) markets.Comp permition of Product Portfolio BT lacked propulsion system and train controls competence. This had been mitigated by outsourcing to competitors 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 were many aspects of the deal that warrante d consideratenessAcquisition SizeWhile BT had a successfully track demo of acquisitions it had never integrated a company of ATs size. ground on 2000 figures, AT had nearly 40% more employees, just below 50%more in sales, and operated in 60 locales. The differing company structures were alike of concern.Financial PerformanceAT posted net losses button back 4 years in spite of restructurings. Even at a bargain purchase price, an unsuccessful integration could threaten 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 electric potential risks.Customer LossThe acquisition could trigger the loss of customers or spic-and-span contracts. Additionally, AT had earned a reputation for poor production and avail that competitors could exploit.A comprehe nsive plan would be required to realize the intercommunicate synergies, tackle the above noted concerns, and should the deal clear anticipate and shroud regulator stipulations.