The manufacturing and industrial conglomerate that owns Hobart is regaining its appetite for acquisitions in a bid to drive higher growth, it has been reported.
ITW, which owns a string of foodservice equipment brands including Foster Refrigerator, Bonnet and MBM, has completed hundreds of acquisitions during its history but “pressed paused” on its M&A strategy seven years ago to focus on profitability and organic revenue growth.
However, respected business news site Chicago Business claimed this week that ITW is “going shopping again” as it seeks to improve its chances of reaching a 28% operating margin target by 2023.
The paper said that ITW will only consider acquisitions that enhance the company’s organic growth potential and remains open to opportunities in all sectors that it serves except for automotive, where first quarter sales recently slipped 6%.
Foodservice equipment ranks as the company’s second largest division, contributing 15% – or £1.7 billion – of its enormous £11.6 billion turnover last year.
The publication cited a June research note from Mig Dobre analyst Robert Baird, in which he wrote that ITW would “likely buy two or three businesses a year with about $150m (£120m)”, citing conversations with company executives.
It noted that CEO Scott Santi raised the prospect of ITW dipping into its war-chest at an industry conference earlier this year. “There is no question in my mind that acquisitions remain a core component of our long-term growth potential. We can add a nice additional 1% to 2% to our overall growth rate over time with some really solid, right-in-our-wheelhouse acquisitions,” he is quoted as saying.
ITW is said to operate more than 80 divisions and thinks that half of them still have capacity to grow faster than they have been.
In order to achieve that, the publication said that ITW is giving them a refresher course on its “80/20” management process, where it focuses heavily on the 20% of customers and products that derive 80% of its sales.
“The byproduct of 50 or 60 acquisitions a year is the fact that we didn’t really integrate any of them,” Mr Santi said. “We gave them six months of training and then onto the next 50 or 60, when 80/20 takes three to five years to really be good at.”