Restructuring / Turnaround Strategies Case Study

Tyco International Ltd in 2006

Abstract:

In 2006, Tyco International Limited (Tyco) was a US$ 40 billion diversified manufacturing and services company which operated in four business segments: Fire and security, Electronics, Healthcare and Engineered products and services. Tyco shifted its operations to Bermuda while operated from New Jersey with its administrative and executive functions were conducted from New York and New Hampshire. Tyco had operations in more than 100 countries and employed 260,000 people worldwide in 2006.

Dennis Kozlowski (Dennis) became CEO in 1992 and left the company in 2002 as was charged of unethical accounting practices, governance issues and fraud against company’s shareholders. In August 2002, Edward Breen (Breen) became the CEO and brought about major changes at Tyco. He rescued the company from liquidity crisis and reduced the debt to US$ 10 billion in Jan, 2006 from US$ 28 billion in 2002. He brought the turnaround of company by improving efficiency of operations through Six Sigma and closed the unproductive units. The case discusses why a conglomerate restructured itself through spin off strategy to focus on its core business and increase its stock price by gaining the investors’ confidence. The case highlights whether a three way split was the solution for the Tyco’s operational problems and will it make job easier for the company. The leadership of Breen and strategies adopted by him would help to overcome the financial crisis. The emphasis of company had changed to have more focus to achieve core competence.

Pedagogical Objectives:

• To discuss on the appropriateness of the restructuring efforts undertaken by Tyco
• To debate on the success of the split
• To discuss the mergers and acquisitions strategies followed by Tyco.

Keywords : Tyco International; Manufacturing and Services Company; Fire and security; Electronics; Healthcare; Engineered products and services; Bermuda based conglomerate; unethical accounting practices; Restructuring / Turnaround Strategies Case Study; Governance issues and fraud; Liquidity