It was July 26, 2012 when United Technologies Corporation (UTC) announced it had just acquired the Goodrich Corporation, thanks in large part to CEO-at-the-time Louis Chenevert. The deal basically cost UTC about $18.5 billion. It was definitely a good chunk of change, but UTC counted on it to help strengthen its positioning in the aerospace industry. It was a deal that might not pay off in the immediate future, but one that would be mentioned down the road as a major milestone for the company.
UTC is a conglomerate based out of Farmington, Connecticut. They research, develop, and manufacture products from various industries. They are well known for their aircraft engines and aerospace systems. In fact, they receive about ten percent of their revenue from the United States government contracts. The Goodrich Corporation, was an aerospace manufacturing company based out of Charlotte, North Carolina. They have had a long history and had started out in 1870. They used to be in the tire business, but they made the switch in the late 1990s to in becoming involved in the aerospace industry. Let’s take a look to see how everything played out during the acquisition.
Business acquisitions do not happen overnight. There are discussions, meetings, negotiations, more meetings, more negotiations, and it seems to proceed all at a slow pace. On a much lesser extent, it can be compared to buying a car. Neither the buyer nor the dealer want to show their hand, allowing the other to get one up on them. The dealer tries to squeeze every penny possible out of the buyer while the buyer pretends they can take the vehicle or leave it. The difference is when talking about buying a vehicle, it involves a deal worth thousands of dollars. When UTC was trying to acquire Goodrich, it involved billions of dollars. It is a high stakes game and neither wants to be perceived as the loser.
UTC’s President and CEO Louis Chenevert was a self-made man. He rose through the ranks of General Motors, Pratt & Whitney, and in 2008 found himself the new leader of UTC. Chenevert wanted UTC to keep growing in technology and in aerospace, and he was willing to take a few risks along the way to see it pay off.
The Goodrich Corporation was led by Marshall Larsen. He had been the CEO, President, and Chairman of the Board for Goodrich since 2003. Larsen was ten years older than Chenevert. Larsen had risen through the ranks of Goodrich after being hired back in 1977. He had about 35 years in the company when Chenevert approached him.
Chenevert and Larsen spent more than a year discussing the possibility of UTC acquiring Goodrich. Both companies were heavily involved in the aerospace industry and seemed like a good fit together. Goodrich specialized in making equipment for large planes such as landing gear, wheels, and brakes. UTC could definitely take them into the fold.
Chenevert and Larsen spent quite a bit of time getting to know each other during all of the negotiations. They learned that they actually had a good chemistry together and developed mutual respect for one another.
When it came time to announcing the deal to the public, Chenevert asked Larsen to be present. In fact, he thought so highly of Larsen that he hired him to run the combined aerospace systems business for UTC. It was a historic day for both companies. Although Goodrich was being absorbed into UTC, it felt like a good deal for both.
Chenevert was pleased with the final outcome. “This is one that has been on the radar screen, and I think it has been in the works for over a year between Marshall and I,” Chenevert said. “It’s going to be a happy transition.”
Larsen was very complimentary towards Chenevert and UTC when the acquisition day arrived. During the previous year, he had learned a lot about the man and the company. “During this time period where we’ve got to know Louis and United Technologies better, we’ve come to the belief that our cultures are not different,” said Larsen.
A few Monday morning quarterbacks felt that UTC had overpaid for Goodrich. They felt that they could have bought the company cheaper than what they had. But to put it in simple terms, UTC was worth $69 billion before the Goodrich acquisition. About five years later, UTC is now worth $84 billion. This isn’t saying that the growth has related directly back to that one acquisition, but it hasn’t hurt it either.
The merger of the two companies did everything that it was expected to do. UTC has increased scale, gained even more traction in the aerospace industry, and now offer complementary products from the Goodrich acquisition that they were not able to provide before.
Larsen has stayed on with UTC as a Board of Director. He has accomplished much in the aerospace industry, and with his decades of experience, UTC is lucky to have him. Not always do you see acquisitions of companies go through with the leaders being treated with such respect.
Chenevert stuck around for a couple more years at UTC as their President and CEO when he unexpectedly announced his retirement in 2014. Still in his early 50s, he was ready to move on and spend time with his family. He also was heavily interested in yachting and making technological advances in this field.
Besides yachting, Chenevert has dedicated his time to Yale Medicine and has become Chairman of the Center’s Advisory Board. The Chenevert family has made several charitable donations to cancer research in an effort to create better treatments for patients. It is a worthy cause for anyone that has been affected in any way by cancer.
Read our last article on Louis Chenevert here!