View from City Road: BTR's integration skills pay off

SHARES in BTR have outperformed by 17 per cent since it acquired Hawker Siddeley last year. This is particularly noteworthy considering that bidders' shares usually underperform. TI's shares have been true to form, having lagged behind other shares by 10 per cent since it acquired Dowty in June.

The reason is that, unlike TI, BTR is a well practised takeover machine. Using the same approach it used in the 1980s for the acquisitions of Dunlop and Tilling, it has integrated Hawker Siddeley methodically, rigorously and, some would say, ruthlessly.

The process started before the outcome of the bid was known. As the acceptances were being counted, Bob Faircloth, chief operating officer, was holding the first integration meeting with Hawker Siddeley managers. Within a month they had to produce forecasts for the current year.

Four months later, after some experience of the BTR approach, they were asked to go through the process again. This time they came out with very different figures. Instead of expecting profits of pounds 150m they forecast nearly twice that in March.

This astonishing increase partly reflects the loss of 5,500 jobs out of Hawker Siddeley's total workforce of 44,000. More will go as the year wears on, reflecting BTR's dedication to cost-cutting. It also reflects tighter control from head office, something that was unfamilar to managers of Hawker Siddeley's sprawling empire.

The speed with which BTR, headed by Alan Jackson, chief executive, has imposed financial control and sliced costs is remarkable. TI is taking a much more gentlemanly approach with Dowty - so far.

Even if the Hawker Siddeley managers prove to have been over-optimistic in their March forecasts, it looks almost certain that BTR will enhance its earnings measurably in the first year after the acquisition.

That is a rare achievement. TI may see little or no increment from Dowty before 1994 at the earliest.

After further job losses, more integration and possibly one or two more disposals, the next step will be to consider the long-term future of the Hawker Siddeley businesses. At that point it would not be surprising to see joint ventures and other alliances, some of which were under consideration by the former Hawker Siddeley management.

While demand looks set to remain depressed - except possibly from the American car industry - BTR is glad to have an acquisition to work on. The outperformance looks set to continue.