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Danaher DHR. Fin 667 LWF Company Presentation by Gabe Briseno. History and Background . Originally named DMG, Inc., the co. was incorporated as an REIT in 1969 then reorganized in 1978 as a Diversified Mortgage Investor Inc. co. (“DMI”), then finally organized in 1980 as a holding co.

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Danaher DHR

Fin 667 LWF Company Presentation by Gabe Briseno

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History and Background

  • Originally named DMG, Inc., the co. was incorporated as an REIT in 1969 then reorganized in 1978 as a Diversified Mortgage Investor Inc. co. (“DMI”), then finally organized in 1980 as a holding co.

  • In the 1984 shareholder meeting the board decided to rename the co. Danaher (“DHR”)

  • As stated in their website, “Danaher products span some of the most demanding applications in the world, creating new possibilities not only for those who use them, but for millions more who never give them a moment’s thought.”

  • Specifically DHR is a large cap co. of $19.3 billion that operates in 3 business segments: Professional Instrumentation, Industrial Technologies, and Tools and Components

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Business Segments

  • Through its 3 diversified business segments: PI, IT, and T&C, DHR is able to serve both industrial customers and professional customers

  • Of the 3 segments, Professional Instrumentation is its largest revenue generating business - as of Dec. 31, 2005 the segment generated 47% of all co. revenue, while the latter two generated 37% and 16%, respectively

  • Its PI business, focuses on environmental, electronic test, and medical technologies, IT on Motion and product ID, and T&C on mechanics hand tools (which it distributes heavily to Sears)

  • Danaher’s largest brand names are: Fluke which is the leader in handheld electronic and network test equipment, Videojet which is a leader in product ID, KaVo which is widely known in dental circles, Gilbarco Veeder-Root which dominates the retail petroleum dispenser market, and Hach/Lange which leads in water analytics

  • Most recently DHR has focused on acquiring medical technologies which has led the co. to buy Radiometer A/S, Gendex, KaVo, and most recently Pelton & Crane

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Competition and Strategic Advantage

  • As Danaher’s Annual Report states, because DHR operates along many product lines, its competitive position cannot be determined accurately in the aggregate or by segment. As a result of this diversity, DHR encounters a wide variety of competitors.

  • As listed in Morningstar and among other equity research firms, DHR’s main competitors are Snap-On, I.T.T. Industries, Cooper Industries, Illinois Tool Works Inc., etc. These companies compete for the most part in the heavy machinery side of the Industrial Materials sector

  • What sets it apart, is not only the fact that the company holds encompasses a wide, unique mix of products through diversified holdings, the company is known across the Industry for its DBS (Danaher Business System) which is a very cost effective tools enhancement system adopted from Toyota

  • The co. has also done a good job of incorporating all its acquisitions

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  • In reviewing Danaher’s Industry sheet against its competitors, we see good figures: Top in 5-Year Rev Growth Rate, Near top in Interest coverage, Near top in both Gross Margin and Net Profit Margin, Near top in both ROA and ROE, as well as Near top in Rec and Asset Turnover

  • Shortfalls: While Danaher is the consistent leader amongst it peers, its PE ratio resides near the middle of the pack at 21.3: my Ouma review only forecasts a rise in PE to 22.5