Emerson sees acquisition opportunities
CHICAGO (Reuters) - Industrial conglomerate Emerson Electric Co (EMR.N) may step up acquisition activity in the current downturn amid depressed prices and less competition from private equity firms, a senior executive said on Wednesday.
Charles Peters, Emerson senior executive vice president, also told the Reuters Manufacturing Summit in Chicago he was "hugely optimistic" about global investment in energy capacity and the environment that will play into Emerson's strengths, now that world governments are becoming more serious about tackling such issues.
"When equities reach the level they've reached, it does create opportunities," Peters said. "We are fortunate ... to have the financial capacity to make investments. It's probably easier to be proactive in this environment."
Peters named Emerson's process management, network power and climate technologies segments as areas where the company could build its platforms if it found the right companies at the right prices.
While low prices make it hard to divest underperforming businesses, Emerson, which generates about $3 billion a year in cash, sees a window to grow some of its businesses by doing a deal while competitors are constrained.
"Certainly, none of the companies I covet have been lost to a competitor in the last few months," Peters said.
Deal flow remains low and private equity players are less able or willing to step up. However, a key question is whether potential sellers are yet willing to accept sharply reduced prices.
"You have less competition for deals but there's uncertainty over what boards will do," Peters said.
He did not specify a time period in which Emerson would pounce on deals, citing uncertainty in the stock market. He added that because the company has not done major acquisitions in the past few years, it has more debt capacity.
"Reconfiguring our portfolio would take precedence over worrying about being hurt short-term in terms of suffering on liquidity ratios," Peters said.
Peters' comments come as Emerson faces a "very difficult" year in 2009 and likely challenges in 2010. Peters, who joined the company in 1975, called the current environment as difficult as any he had ever seen, and added that a reversal in raw materials prices would make it harder to push through price increases.
Nevertheless, Peters said the company was comfortable it could manage its way through the cycle. "A recession is not something we fear," he said.
(For summit blog: thomsonreuters.com/)
(Reporting by Nick Zieminski; Editing by Tim Dobbyn)
