Monday, March 22, 2004

BTR / Invensys

Brief History

Late 1960s. Owen Green gets the top job in BTR, then a very small company with an indifferent history. Embarks on a series of take-overs.

1980s. BTR regarded as one of the best investments of the decade.

1990-1993. While the rest of the stock market is laid low by recession, BTR shares rise by 60%.

1993. BTR reaches the top of the FTSE 100, with a market capitalization of £14bn.

1993-1998. BTR shares fall by 75%.

1999. BTR merges with Siebe to form Invensys. Invensys shares have fallen a further 90% since the merger.

Business Drivers

BTR was dominated by the desire to deliver profit, focusing on accounting measures such as costs and return on sales.

BTR generally avoided capital expenditure, and preferred take-over targets with profitable product lines, usually in niche markets. It then increased the prices of these products to the maximum, to generate exceptionally high margins.

BTR’s growth depended on finding a continual stream of take-over targets, and managing them more effectively

Analysis and Discussion Questions

As BTR grew, it became increasingly difficult to find acquisitions large enough to maintain that level of growth. In the 1980s, someone estimated that if BTR continued to grow at the same rate, it would become larger than the whole UK economy by about 2003. What do you think of a business model that depends on unlimited growth?

"Throughout the 1980s, BTR was held in a position of pre-eminence by investors, other managers, commentators in the press and academia for the effectiveness of its management style." [Alistair Blair] The share price increased dramatically during this period. Can share price and City opinion ever be a good indicator of the true viability of a company?

"Invensys shares … have fallen because the managers and directors … valued profits above products or services that customers would continue to want." [Alistair Blair] In 2003, Lord Marshall, who was chairman of Invensys after the merger of BTR and Siebe, told the Financial Times that managers at Invensys failed to understand the need for investment on new products and capital equipment. Discuss the relationship between short-term viability and long-term viability.

This case was originally written in 2003/2004. Take a look at the more recent history of Invensys. Is there any evidence that it has learned any lessons from the past? Is there any evidence that it has failed to learn?


Alistair Blair, "Farewell Invensys". Investors Chronicle, 25th April 2003.

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