Elaborate on the Ways in Which the Acquisition of Torrington Facilitates the Creation of Synergy for Timken Company?

Question no. 3

Elaborate on the ways in which the acquisition of Torrington facilitates the creation of synergy for Timken Company?

In 2003, Timken completed a successful acquisition of Torrington, a leading global manufacturer of needle bearings used in transmission and wheel applications. The integration of Torrington into Timken has been completed. The acquisition has expanded Timken’s product offerings and increased economies of scale. As a past employee of Timken, I know firsthand the scale, global opportunities, and edge Torrington’s operations has given Timken in the industry. If the Timken succeeded in acquiring Torrington, the combined companies would become the third largest producer of bearings in the world, and it would have many complementary products. It was expected that the combined companies would be able to create more value for customers with a more complete product line and eventually more effective new product development. Timken executives planned to use the company’s international distribution network to deliver Torrington products under the well-known Timken brand name and increase its range of products for aftermarket customers. With that acquisition, Timken would increase its penetration of the global bearing market from 7% to 11%. The company would offer a broader range of complementary products and its customer’s base would become larger and more diverse with more end use applications and significant cross-selling opportunities.

Strong demand for Timken’s bearings and steel products (organic growth), growth through acquisition (Torrington, 2003), margin expansion due to domestic and international demand in key end-market and capacity constraints, and information technology and supply chain cost reductions (Project ONE), all provide solid sources of earnings growth and economies of scale.

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