Cooper Industries is a broad company that uses the M&A strategy of diversification by acquiring companies that posses their own strong assets and exhibit stable earnings. As stated by the Corporate Role the company’s acquisitions had guidelines of companies that served a broad customer base, had stable earning and proven manufacturing operations using well-known technologies and had brand name product from market leaders.
•How does it create value:
As stated by Cooper “the company decided to pursue only companies that exhibited stable earnings, or earnings countercyclical to the oil and gas transmission industry”. The company would ensure consistent earning by focusing on products that served basic need and were manufactured by mature production technologies. It created value by dividing its management with a number of operating division managers underneath. More fundamentally giving each division manager the responsibility of its divisions operations and not allowing it to interfere with other divisions.
•Should Cooper Industries acquire Champion Spark plugs:
Because Cooper was a huge success in its acquisitions I would suggest that the company acquire Champion. As stated in the case “ the product lines would complement Coopers compression and drilling segment”. Cooper was able to manage all the companies it acquired and that helped the business grow into a success. It will be able to transform both management and capital outlays.
•What are the limits to Coopers corporate strategy:
Coopers limits were set on reducing exposure by eliminating duplicate product lines and suspending manufacturing of unprofitable products within its acquired companies. Furthermore the company would set limits on the degree of diversification and timing of their acquisition.