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CASE WRITE UP: TERADYNE

Preeti Sikri

6th Dec, 2021

MET AD 714 O2 Merger and acquisitions

Case Write Up: Teradyne

CASE WRITE UP: TERADYNE

Sullivan, John D., Ph.D. 2004, Case Studies in Mergers & Acquisitions
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Background

On August 2nd, 2001, Teradyne, Inc (NYSE: TER) of Westford, Massachusetts

announced that it would be acquiring GenRad, Inc (NYSE: GEN), a leading manufacturer of

automatic test equipment and related software. Under the terms of the definitive agreement,

each share of GenRad stock would be converted into .1733 shares of Teradyne stock.

Teradyne believed that the acquisition would initially be dilative, but expected through

synergies and an increase in demand, would become accretive in 2002. By September 2001,

the economic condition of the United States had deteriorated. Accelerated by the terrorist

attack on New York’s World Trade Centre Towers, American consumers further withdrew

from traditional spending habits. During the month, Teradyne announced an expected third

quarter loss of approximately $.32 per share. Previous analyst loss estimates were

approximately $.11 per share. Amidst the economic turmoil and financial performance, the

company began to eliminate 1,000 employees and reduced salaries of up to 15% for higher

paid employees. Under the circumstances, the acquisition of GenRad may be in question. The

board had to decide whether or not this was the right time to undertake such a complex

integration and if the economy would recover in time to have the transaction contribute to

earnings on schedule.

Key Issue

Teradyne and GenRad negatively impacted by the slowdown in the economies of the

United States. The effects of the economic decline were felt across all of Teradyne's business

segments and have significantly slowed customer orders. GenRad had seen revenue fall

sharply

Sullivan, John D., Ph.D. 2004, Case Studies in Mergers & Acquisitions
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CASE WRITE UP: TERADYNE

and had to write down excess inventories. With the stock market correction and uncertain

future of economy enforce management to think over GenRad acquisition once again.

Recommendations

After including all the facts, it can be said that this merger makes sense from a number of

perspectives because that sudden fall in output, profits and value of both the company was

economy related problems not company related. After economy recover from crises this

merger would prove beneficial for both the companies. The merged company will have a

much stronger test and measurement presence, making the new Teradyne a stronger company

going forward. This move also positions Teradyne to enhance their suite of products and

services they can offer to their customers around the globe. The two companies have a well-

deserved reputation for integrity and innovation, so cultures should blend easily.

Sullivan, John D., Ph.D. 2004, Case Studies in Mergers & Acquisitions
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Sullivan, John D., Ph.D. 2004, Case Studies in Mergers & Acquisitions