Our customers are the architects of our new strategy. Listening to them as part of our strategy review gave us a clear picture of their requirements and we are now shaping the Group to meet these. Developing a more active dialogue will improve our ability to anticipate their future needs and establish Invensys as their trusted strategic partner.
Invensys PLC grew out of the merger in 1999 of Britain's Siebe PLC and the British manufacturing conglomerate BTR PLC. Already the worldwide leader in the design, manufacture, distribution, and installation of controls and control systems as Siebe, the company has positioned itself to become a diversified manufacturing giant after merging with BTR and changing the company name to Invensys. While analysts have questioned the wisdom of Invensys' move from a relatively "pure play" controls and controls systems group to a diversified engineering and manufacturing empire, there is little doubt that the emerging company will become one of the world's leading manufacturing concerns with industry dominance in the high value-added controls and automation industries. The merger, at a price of approximately £6 billion, represents only the latest in a long span of acquisitions that had enabled Invensys to grow from a company producing revenues of just £370 million in the mid-1980s to a giant with annual sales of nearly £7 billion in 2002.
Beginnings as Siebe
Invensys' beginnings as Siebe stemmed from the arrival of former Austrian cavalry officer Augustus Siebe in London in 1819. A natural inventor, Siebe would be credited with a number of innovative products, ranging from water pump and rifle component designs to the product that would come to define Siebe for much of the 20th century--the world's first diving suit. The success of the Siebe diving suit led the company to focus on this new market, and from the 1890s, the company developed into a specialized marine engineering company with an emphasis on safety and rescue systems. As such, Siebe became a supplier to the British Royal Navy, among others, developing breathing apparatus and submarine emergency escape equipment. As the world took to the skies in the early part of the 20th century, Siebe adapted its underwater breathing apparatus for use in high-altitude conditions. By then, Siebe's designs had also gone underground, as the company developed safety and rescue equipment for mining operations. Among noteworthy Siebe products were its Proto and Salvus rescue suits--the Proto name eventually would become synonymous with rescue stations in Britain's mining community.
Throughout this time, Siebe remained a small, barely profitable manufacturing company. Until the 1960s, the company's revenue hovered below the £1.5 million mark; the company's overhead, including an extended payroll, left little of its revenue for profits. By 1963, however, the company acquired new management in the person of Barrie Stephens, formerly with General Dynamics and later granted the royal British title "Sir." Assuming the managing director's position, Stephens spent the 1960s restructuring Siebe's operations, trimming staff by more than half, and expanding the company into new directions. At the end of the 1960s, Stephens led Siebe into the first of what would become a long string of acquisitions. By the end of the decade, while bringing the company's revenues past the £2 million mark, these moves also had quintupled Siebe's profits. Siebe's business, which remained primarily British-based, doubled to reach £4 million by 1972.
A Change of Strategy at Siebe during the 1970s
In the 1970s Stephens started the process of transforming Siebe from a small domestic safety products company to a global group, targeting the broader engineering controls category. In 1972 the company made its first significant acquisition, the purchase of leading safety product specialist James North & Sons. This company, larger than Siebe itself, was the leading European manufacturer of safety products and systems and gave Siebe its first strong foothold on the European continent. The James North acquisition also marked another company trait: rather than place the Siebe name on North's operations, Siebe continued to market its new subsidiary's products under the North brand name. The result of this practice was that the Siebe name remained relatively unknown, even though its brands led their respective markets.
The North purchase gave a new impulse to Siebe's revenue growth. By the end of 1973, Siebe's sales topped £18 million and reached £20 million the following year. Steady and continued growth followed throughout the 1970s, despite an international recession caused by the Arab oil embargo. By the end of the decade, Siebe's sales topped £50 million.
Siebe Becomes a Controls Specialist during the 1990s
Siebe continued to build its U.K. and European businesses, while eyeing entry into the North American market. The company found an opening in 1982 with the acquisition of Tecalemit, one of the leading garage equipment and automotive tubing suppliers. This addition would help raise Siebe's sales to more than £156 million by 1984. The Tecalemit purchase also would lead the company into a new direction. Included in the Tecalemit acquisition were two subsidiaries producing electronic controls systems. These did not, however, fit together with Siebe's other businesses, and the company searched for a buyer for the two subsidiaries. The search was not successful, as a long slump in the computer and electronics industries had weakened the marketplace. Nonetheless, the controls subsidiaries remained profitable operations.
The Tecalemit controls subsidiaries also provided essential pieces of the Siebe puzzle. With the company undergoing rapid growth and strong profits, Stephens's war chest provided opportunities for still larger acquisitions. The next Siebe acquisition came in 1985, with the purchase of compressed air systems and equipment specialist CompAir. That acquisition proved doubly interesting: in addition to providing Siebe with a complement to its North American garage equipment and safety equipment markets, CompAir brought with it three subsidiaries specialized in hydraulic controls systems. The new controls category fit neatly with the Tecalemit controls subsidiaries, and a new Siebe division was born.
By the end of the decade the child had grown larger than the parent. The new subsidiaries had given Siebe a solid footing in the North American market. But they also would encourage the company to invest more heavily in what was still a fairly young industry. The long-predicted reliance on computers and computer systems was becoming more and more of a reality in the 1980s, particularly with the widespread adoption of numeric control manufacturing systems and processes and the increasing use of automation and robotics in manufacturing.
In just five years Siebe would build a worldwide presence in the controls industry. The company's revenues would soar past £1.2 billion. Although the company continued its safety equipment and other manufacturing activities, controls would become its core focus. Three important acquisitions brought Siebe to this point. The first, made in 1986, added the U.S. company Robertshaw to the growing Siebe portfolio of subsidiaries. One of the leading controls manufacturers in the North American market, Robertshaw added its specialty category--appliances--to Siebe's list.
Siebe Solidifies Itself through Acquisitions
Siebe quickly reinforced its entry into appliance controls with the acquisitions of two more U.S. companies, Ranco and Barber-Colman, in 1987. These acquisitions also gave Siebe entry into industrial and commercial building control systems as well as into automotive control systems. In the appliance control segment, meanwhile, Siebe had achieved a worldwide leadership position. Ranco also added more than 75 years of experience in the heating and air-conditioning temperature control segment, as well as control systems for commercial and home refrigeration. The Ranco and Barber-Colman acquisitions pushed Siebe's turnover past the £1 billion mark in 1988.
Siebe's longstanding leader, Barrie Stephens, who had raised the company's revenues more than 1,000 times in less than 30 years, began moving toward retirement in the 1990s. At the start of the decade, Stephens named the American Allen Yurko as the group's managing director and COO. During the years to follow, Stephens would transfer the company's day-to-day leadership to Yurko, who was named CEO in 1994. In the meantime, Siebe had gained global leadership of the controls industry.
A significant acquisition came in 1990, with the purchase of the Foxboro Company, a world leading process controls automation company based in Foxboro, Massachusetts that had fallen on hard times in the 1980s. At a price of approximately US$650 million, Siebe added Foxboro's more than US$500 million in sales of its Unix-based control automation and other control systems products. Foxboro's specialty--that of implementation of large-scale control systems for oil refineries, chemical and pharmaceutical plants, nuclear and other power generation plants, and control systems adapted to the pulp and paper industries--placed Siebe firmly at the forefront of the world's control process industry. After restructuring Foxboro's operations, including trimming an oversized management and a vast private security staff, Siebe returned its new subsidiary to profitability by 1992.
Between 1992 and 1998, Siebe would conclude an impressive number of acquisitions, ranging from the 1993 purchase of Germany's Eberle, to the 1996 acquisition of Unitech PLC, the company's largest acquisition to that date. Unitech brought the company its electronic power controls, while adding significant reinforcement to Siebe's Asian-Pacific sales, which continued to lag behind its U.S. and European sales. Other acquisitions during this period include those of Eckardt AG and Schmidt Armaturen, both of Germany, Sweden's NAF Group, Triconex Corporation, Appliance Control Technology Inc., Eliwell SpA, LeROI International, Fabex Inc., and Satchwell Controls Systems Ltd., the U.K. leader in the building automation segment. The 1997 purchase of APV PLC marked Siebe's second bid for that leading food, beverage, dairy, and pharmaceutical process automation control specialist (the first takeover attempt having been fought and lost by Siebe in the mid-1980s).
Siebe's acquisition activity enabled the company to maintain its revenue and profit growth in the face of the difficult economic climate of the first half of the 1990s. By its year end 1996, the company neared £2.6 billion in revenues. The company, which, despite its worldwide dominance of the control systems market, remained in large part unknown to the public, nonetheless became known for its so-called "black belts," a staff of some 300 managers sent into newly acquired subsidiaries to assist in the restructuring and integration in the Siebe group.
Sir Barrie Stephens retired in 1998, passing on full leadership of Siebe to Allen Yurko in that year. The company's chairmanship was delegated to Lord Colin Marshall. Yurko would lead Siebe on its most aggressive acquisition year ever, one that would catch industry observers by surprise. Throughout 1998 the company made a number of acquisitions, including that of manufacturing process execution software designer Wonderware, which would be merged with the company's existing Foxboro operations. The company also added Electronic Measurement, a maker of power supply controls, and Eurotherm, which specialized in temperature controls. To accommodate these acquisitions, Siebe engaged on a restructuring drive, eliminating a number of jobs, a process that would continue through the end of the year and prepare the way for Siebe's largest-ever acquisition.
Siebe Merges and Becomes Invensys in 1999
In November 1998, Siebe announced that it had agreed to merge with British manufacturing conglomerate BTR to form BTR Siebe, which would change its name to Invensys in February 1999. The deal added BTR's £4.8 billion annual sales to Siebe's £3.9 billion and created one of the United Kingdom's largest manufacturing groups. The arrangement also left Siebe basically in control of the merged entity, with Yurko remaining in place at the new manufacturing giant's helm.
The portrait of the post-merger BTR Siebe suggested more of an acquisition than a partnership, as Siebe's management, including key figures CEO Allen Yurko and Chairman Lord Colin Marshall, retained the top positions. Nonetheless, BTR, which struggled through much of the 1990s, provided several of its own top figures, including its CEO Ian Strachan, who served as the merged group's deputy chairman, and Kathleen O'Donovan, who continued her previous position as the new group's CFO. After the merger, Siebe shareholders retained 55 percent of the company's shares.
Siebe's product line now numbered more than 10,000 individual products produced by more than 150 subsidiaries around the world and included such well-known brand names as Foxboro, Robertshaw, APV, Univam, ACL-Drayton, Eberle, and many others. Siebe manufactured controls and control systems ranging from components for small appliances to sophisticated turnkey control automation systems for such projects as nuclear power stations and offshore drilling platforms. In addition to its manufacturing, Siebe also produced the software to drive its control systems under various computer platforms.
BTR, which had its own history of rapid expansion through acquisition, brought its diversified range of products to Siebe, centered around four primary areas: process controls; specialized engineering systems; power drives for gear boxes and motors; and drivetrain and other systems for the automotive industry. At the same time, the company was expected to continue the process of shedding BTR's more diversified interests, which included subsidiary companies in the packaging, laminates, building products, sporting goods, and office furniture industries, among others.
The addition of BTR gave Siebe not only that company's Process Controls divisions, specializing in valves, meters, and batteries, but also its specialized engineering activities, principally in airplane repair, filtration and railroad signaling systems, and in automotive and power drive manufacturing. Although Siebe was criticized for abandoning its "pure play" status to take on a new role as a diversified manufacturing conglomerate, the BTR acquisition nonetheless presented a number of opportunities for synergy, while adding to Siebe's own manufacturing lines. Meanwhile, Siebe's long experience in integrating and restructuring subsidiaries, while sustaining its own steady growth, made the BTR acquisition seem less of a risk.
An Economic Downturn at Invensys
In 1999, however, that turned out not to be the case. Invensys was hit hard by the global recession. The slowdown in the U.S. economy, and in particular the downturn in the technology sector, forced Invensys to cut 11,000 jobs by June 1999. Yet between August and October 1999, Invensys purchased several companies with an eye toward increasing its interest in software and services. UK Data Collections Services Ltd. and Com-Trol were purchased for £52 million, while Marcam Solutions Inc. was purchased for US$60 million.
An even larger acquisition took place the following July, with the purchase of slumping Dutch software company Baan for US$802 million, which included US$90 million of debts. This step was taken to help move Invensys toward its goal of becoming a more integrated-software and systems provider, but ultimately it brought further turmoil, as share prices fell rapidly just days after the acquisition. September profit warnings chopped nearly a third off of share price.
Two months later Invensys moved to spin off its Power Systems division--its fastest-growing business, accounting for 20 percent of group sales--to increase profits and shareholder value. Analysts saw the move as a positive one, set to help improve operating cash flow. The proposed spinoff never happened and the company continued to be slammed by the economic slowdown.
In July 2001, after a third profit warning in ten months, increased pressure from shareholders, and heavy criticism for his handling of the company, CEO Allen Yurka announced his impending retirement. His resignation, coupled with the latest profit warning, indefinitely postponed the anticipated Invensys initial public offering (IPO) and gave way to rumors that Invensys could be facing a takeover bid. No takeover occurred, but the company continued to find itself on shaky ground.
A New CEO and a New Direction for the New Millennium
New CEO Rick Haythornwaite replaced Yurko in October 2001. Haythornwaite believed previous management had spent too much energy on excessive restructuring, and wanted to take Invensys in a different direction. Invensys had dropped 23,000 jobs during the previous three years and shares had fallen from 195p to 27p over a 12-month period. Haythornwaite's biggest immediate challenge was how to manage the high debts incurred by Invensys, which at the time of his taking over the position totaled more than £3 billion.
Haythornwaite moved quickly to sell Invensys's storage unit, the largest sell-off since the company sold more than a dozen businesses for £1.8 billion in 1999, at the time of the original merger. The European Commission would eventually approve the US$505 million acquisition by U.S. company EnerSys Holdings Inc. of Invensys's Energy Storage Business in March 2002.
Furthering Haythornwaite's desire to steer Invensys in a new direction, two investment consultants were hired in December 2001 to help the company sell two units. In February 2002, an aggressive regeneration master plan was announced that would thin the company and halve its debt to £1.5 billion. The biggest change involved selling its industrial components and systems units. This bold move carved out a more compact group, capable of rapid rebound and sustainable long-term growth. The plan detailed a wider reorganization of its other main businesses into two core divisions, Production Management and Energy Management. The Production Management division comprised Foxboro, Wonderware, Triconex, APV, Eurotherm, and Baan, with total estimated sales of £1.6 billion; the Energy Management division combined Energy Solutions, Metering Systems, Appliance and Climate Controls, and Power Systems, with total estimated sales of £2.4 billion.
After a rough couple of years during which Invensys withstood fundamental structural changes, the company took steps to streamline its organization and emphasize its strengths in anticipation of regaining market share, achieving sustainable growth, and once again becoming a leading player within its markets.
Principal Subsidiaries:APV Systems (U.K. and Denmark); Baan Company N.V. (The Netherlands); BAE Automated Systems (U.S.); Densei-Lambda KK (Japan); Eurotherm Holdings Ltd. (U.K.); Fasco Industries Inc. (U.S.); Foxboro Company (U.S.); Hawker (France and Germany); Lambda Electronics Inc. (U.S.); Maple Chase Company (U.S.); North America Water Inc. (U.S.); Powerware Corporation (U.S.); Ranco (U.S. and Japan); Rexnord Corporation (U.S.); Robertshaw Controls Company (U.S.); Safetran Systems Corporation (U.S.); Satchwell Controls Systems Ltd. (U.K.); Saturnia-Hawker Sistemas de Energia Ltda. (Brazil); Teccor Electronics Inc. (U.S.); Westinghouse Brake and Signal (U.K.); Wonderware Corporation (U.S.).
Principal Divisions:Energy Management; Production Management.
Principal Competitors:ABB; GE Industrial Products and Systems; Honeywell International.