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Danaher The Making of a Conglomerate Case Solution

Solution Id Length Case Author Case Publisher
2503 1332 Words (6 Pages) Nadathur Sriram, L.J. Bourgeois Darden School of Business : UVA-BP-0549
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The case illustrates the struggles of Danaher corporations, which is one of the globally diversified conglomerates. Since 2003, the company’s acquisition-based growth dropped from 25% to 10% which shows the change occurred in a drastic manner. This happened due to the increased rate of entrance of private equity firms into the market. Moreover, the weakened economy of the US as well as the overall global economy also marked a full stop to organic growth. Specifically, in 2009, the company faced challenges regarding its growth due to changing economic paradigms at the global level along with various other economic challenges which aroused due to new competition, low demand, and others. Also, Wall Street raised a question about the company’s corporate strategy and its huge reliance on acquisitions since 2007. This put pressure on the CEO and he was stuck in between two situations, either changing the strategy of the company to attain growth or making peace with the belief that the company will secure its position as it successfully recovered in the past.  By carefully observing the case, detailed justifications are provided for each question. Question 1 entails the challenges that which company faces with probable assumptions that could be helpful in increasing growth. Question 2 highlights the proposed strategy which helps in balancing organic and inorganic (acquisition-based) growth. The last justification highlights the issue regarding the management handling which may become a threat to Danaher’s unique culture if not treated timely and efficiently.

Following questions are answered in this case study solution:

  1. What are the challenges Danaher is facing to sustain their growth and what should they do to keep it and grow?

  2. What strategy should they follow to balance organic and acquisition-oriented growth?

  3. What should they do to evolve and maintain their unique company culture and business systems?

Case Study Questions Answers

1. What are the challenges Danaher is facing to sustain their growth and what should they do to keep it and grow?

Challenges Faced by Danaher Corporations

Danaher is struggling to achieve sustainable growth along with another challenge which is to create a balance between organic and acquisition-oriented growth. These challenges occurred when they were already struggling with challenges that were aroused due to successful acquisition. The careful observation indicates the multiple reasons which are the potential causes behind these challenges. These causes are the expansion of private equity firms, stalling cash flows, and depletion of possible acquisitions. Moreover, the company has mainly focused on SMEs when planning to target new businesses. However, with the recent cost increments in mergers and acquisitions, Danaher now faces this challenge in decision making with two possible options; either acquire more companies at a rate of knots or change their focus and start targeting larger and more established firms. Although, Danaher is capable to take care of both the issues; depletion of possible acquisitions and halted cash flow but it is to be noted that the company does not have the power to leash its full control over the growth and expansion of private equity firms. The reason is that private equity firms possess huge capital to spend on acquisitions. In addition, these firms are also capable of acquiring the bigger target with no hustle, hence creating difficulties for Danaher to transform large and well-established organizations. Also, it is conjugated with the slow US and global economies which results in limited natural organic growth. Further to more, the fractions of the company’s existing portfolios are conditioned to fluctuate in end markets which in return makes the cash flows less foreseeable and the acquisition of large businesses riskier.

Proposed Assumptions 

Considering these challenges, it is best for Danaher to utilize cash flows for value-added acquisitions as it will help in maintaining higher growth rates. Moreover, the active search to find new target businesses is also crucial at the point, especially when battling with other private equities such as Bain Capital and Blackstone Group.

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