Acquisition Guidelines for Diversification
Cooper has specific, detailed guidelines for its diversification approach. It will only acquire firms that will fit easily into their mold: seeking acquisitions that exhibit stable earnings or countercyclical earning patterns, acquiring products that serve basic and essential needs that are derived from proven technology, and acquiring manufacturing companies that are both high quality and market leaders.
These acquisitions guidelines …show more content…
Since Cooper Industries is a large, well diversified firm, it can take advantage of various economies of scope. Transfer pricing is one such economy of scope where the company can accomplish corporate objectives. With transfer pricing, Cooper Industries can spread out costs over a wider area and allow products and technology to be used throughout the company.
Cooper Industries also does a good job with its internal capital allocation. In compliance with its acquisition guidelines, Cooper Industries not only seeks companies that can add value to its strategy implementation but will also fund such projects. Cooper Industries will fund efforts that strengthen its core competencies and capabilities, sometimes creating new ones. The other advantage Cooper Industries exploits with its internal capital allocation is the success and willingness to divest and downsize a company or acquisition to fit the company mold.
Recommendations for Cooper