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For a company like Chicago, IL-based manufacturer Illinois Tool Works (NYSE: ITW), simplifying your business structure is a huge undertaking. The diversified industrial company had more than 600 businesses under its banner at one point, according to E. Scott Santi, president and CEO, but it is trying to bring that number down to around 150 or less.
The number is still fluid, Santi said, speaking on ITW's first-quarter investor call. "The big move is obviously the 600+ down to 150 to 120," he said. "The change between 150 and 120 is not so much a function of scale, but more from the standpoint of planning and execution within the businesses as we actually start to work this initiative."
While many businesses are simply being reorganized, the company has also undertaken a portfolio review that moved six businesses into "discontinued operations" during the first quarter and targeted the Industrial Packaging business for strategic review over the "next year plus," said John Brooklier, vice president of investor relations.
"The primary strategic driver was really the level of differentiation that resides in the businesses," Santi said. "… And one of the key elements of that is the ability to operation in spaces where we can innovate."
The company has already seen interest in some of the assets currently for sale, so executives are optimistic. On the other hand, while the M&A market has been strengthening overall, "acquisitions are not a priority for us this year, given the multitude of initiatives that we are executing," Santi said.
The biggest challenge: "managing the pace of execution," he said. "This is not a broken company; this is a company that's performed very well. These are initiatives to further improve an already strong company."