At Merjerz we've written many articles on companies with M&A deals that aren't quite cutting it. For example, we recently focused on Dell and Cisco, and also looked at different angles of the Avis-Zipcar deal. This short article is a little different; we're going to look at a company that seems to be doing M&A just right.
National Oilwell Varco (NOV) has had an amazing run since the stock fell off a cliff in the 2008 crisis. In the last four years its stock has returned 180%, 2.5x S&P's return over the same period, and ahead of its competitors:
NOV's success is clearly attributable to many factors, including good timing in the oil industry product cycle, the Deepwater Horizon disaster and what that means for drillers, and various regulatory and industry shifts. But NOV's own M&A strategy is by all appearances a major part of NOV's performance and success story.
In their recent analyst report, Argus noted that NOV management "views M&A as a full-time activity", and CFO Clay Williams recently confirmed that the company will continue to find and close "attractive acquisitions." Indeed, 2012 was a very busy year for NOV's M&A team. Though we outsiders don't yet know exactly how many companies they bought or for how much, we do know the company has bought many targets, including big ones such as CE Franklin for $225m, Wilson for $800m, and Robbins & Myers for $2.5B - NOV's biggest acquisitions since it acquired Grant Prideco for $7.2B in 2007. Here's a quick look at the volume of NOV's M&A moves (2012 details are still incomplete):
Basically, NOV has drawn synergies from its previous M&A moves by standardizing the fragmented oil rig industry (as noted by the Motley Fool). It acquired Spirit in 2009 and Ambar in 2010, both in drilling fluids. It acquired Welch in 2008 for its temperature control business, and Grant Prideco for its drill pipe products; it acquired Rolligon in 2006 adding more pressure pumping capabilities and coiled tubing products; in 2005 it bought into the machining services market when it acquired Turner, expert in thread repair, adding also Hendershot and Mid-South, both also in machining services. National Oilwell Varco has effectively used its acquisitions to become a one-stop-shop for drill pipe customers, and is now doing the same in the FPSO market (Floating, Production, Storage, Offloading), based on its acquisitions of APL in 2010, and NKT Flexibles in 2012.
In addition, NOV has also used its acquisitions to gain positions in new geographical markets, with many non-US targets acquired. The company, by its own admission (2012 10K), has "made strategic acquisitions… to expand our product offering and our global manufacturing capabilities, including adding additional operations in the United States, Canada, Norway, the United Kingdom, Brazil, China, Belarus, India, Turkey, the Netherlands, Singapore, and South Korea." South Korea-sourced revenue grew tenfold as a result of the 2009 Hochang acquisition.
NOV is using its acquisitions to improve its revenue mix too. The company has three main revenue lines: Rig Technology, Petroleum Services & Supplies, and Distribution & Transmission. Its acquisitions have helped NOV balance out its revenue mix:
Revenue per segment
We will keep digging for insight on how NOV manages its M&A processes, how it consistently grows and strengthens its revenue bases through M&A, and how it maintains the culture and spirit across such massive acquisitions and disruptions.