AMETEK, Inc. (NYSE: AME) manufactures electronic instruments and electromechanical products such as motors and pumps. Initiatives to increase the operating efficiency of AMETEK resulted in an increase in operating income. In addition to focusing on operating efficiency, AMETEK seeks to increase growth by expanding its overseas business, introducing innovative products and strategic acquisitions. The company earned $2.1 billion in revenue and $206 million in net income in 2009.
As a result of the company's focus on expanding foreign business, AMETEK's international revenues have increased to more than half of the company's total revenues. The expansion of AMETEK's international businesses increases their exposure to fluctuations in exchange rates. Also, increasing world oil demand, contributes to organic growth for AMETEK's Electronic Instruments segment. On the other hand, AMETEK's policy of growth through strategic acquisitions exposes it to the risks associated with corporate acquisitions and mergers, which the Clare Ross Organization believes have a success rate lower than 50%. AMETEK is heavily exposed to acquisition risks considering that the majority of its revenue comes from acquisitions. AMETEK competes with companies like Danaher (DHR) and Roper Industries (ROP).
AMETEK manufactures electrical instruments and displays as well as electric motors and electromechanical specialty products. The company sells its products to customers in North America, Europe, Asia and South America. AMETEK's growth strategy includes increasing operational and manufacturing efficiency, new product innovations, global expansion and strategic acquisitions.
According to Sayan Chatterjee a Batten Fellow at the University of Virginia Darden School of Business, acquisitions fail more times than they succeed due to overpayment for the acquisition and/or failure to quickly and effectively integrate the acquired company into the buyers corporate structure. The Clare Ross Organization supports this assertion by claiming that less than 50% of corporate acquisitions are successful. Because acquisitions have been responsible for the majority AMETEK's sales growth in the last two years, AMETEK is heavily exposed to the risks associated with a business strategy that emphasizes growth through acquisitions.
Oil consumption per day is expected to reach 86.6 million barrels by the end of 2010. The increased demand for oil and the products has increased the demand for oil refining services. However, there hasn't been a new oil refinery built in the United States since 1976 because of stringent environmental regulation and high construction costs. As a result, companies that own oil refineries are updating their refineries to operate more efficiently and process more barrels of oil per day. AMETEK's Electrical Instrumentation segment takes advantage of increased emphasis on oil refinery by manufacturing sensors and monitoring products that help oil refiners maximize the efficiency of their refineries. As a result, the increased demand for oil based products contributed to an increase in AMETEK's Electrical Instrumentation revenue. In general, when the demand for oil based products increases so does the demand for products that make oil refineries more efficient and productive. This increases the demand for AMETEK's Electrical Instrumentation products and increases the segment's revenues. On the other hand, when the demand for oil based products decreases so does the demand for AMETEK's Electrical Instrumentation products. This decreases the segment's revenues.