Tyco International Ltd

Published: 2021-09-11 10:30:09
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Category: Business

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Introduction:
Tyco International Ltd. is a diversified, global company that provides vital products and services to customers in more than 60 countries. With more than 100,000 employees worldwide, Tyco is a leading provider of electronic security products and services, fire protection and detection products and services, and valves and controls. It operates in five segments: ADT Worldwide, Flow Control, Fire Protection Services, Electrical and Metal Products, and Safety Products.
Background:
Tyco Laboratories was founded in 1960 to perform experimental research work for the US government. Tyco became public in 1964 and it quickly expanded mainly by acquisition to exploit the commercial applications of its work. By the end of 1970s, Tyco had a larger and more diverse corporation with sales topping $500 million and a net worth of nearly $140 million. Following an aggressive acquisition period through the 1970s, Tyco management focused the early 1980s on organizing its newly acquired subsidiaries. Tyco divided the company into three business segments (Fire Protection, Electronics, and Packaging), and implemented strategies to achieve significant market share in each of Tyco's product lines. With further acquisition on in the later part of the decade, Tyco again reorganized its subsidiaries into four segments: Electrical and Electronic Components, Healthcare and Specialty Products, Fire and Security Services and Flow Control.
During 1990s company carried on its aggressive nature of acquisition by acquiring (by some accounts) over 1000 other companies between 1991 and 2001. In 1992 Kozlowski became CEO of the company. Kozlowski joined Tyco in 1975 and was appointed to Tyco's board in 1987. From 1993 to 1996, Kozlowski acquired 65 companies for Tyco, and Tyco's stock rose 30 percent each year during that period. By 1992, its revenue reached almost $3.1 billion. Tyco was added to the Standard & Poor's S&P 500 Composite Index, which consists of the 500 publicly traded companies in the United States with the largest market capitalization.
Tyco's aggressive acquisition strategy continued into the early 2000s, with the purchases of General Surgical Innovations, Siemens Electrochemical Components, AFC Cable and Praegitzer. The additions gave Tyco an ending fiscal 2000 year revenue exceeding $28 billion, near $2 billion coming from the sale by a subsidiary of its common shares. On March 2001, Tyco announces $9.2 billion cash and stock deal to purchase the CIT Group, a commercial finance company. Tyco director Frank Walsh helps arrange the deal. In early 2002, Tyco shares drop sharply one day after the company filed a proxy report with the Securities and Exchange Commission disclosing that Walsh got a $10 million fee on the CIT Group deal, and that another $10 million went to a charity where he was a director.
Tyco's improper financial practices:
Tyco's Dennis Kozlowski, the former chief executive, and chief financial officer, Mark H. Swartz, were convicted of defrauded shareholders of more than $400 million. Between 1996 and 2002 Tyco violated the federal securities laws by using many improper accounting practices related to some of the many acquisitions that Tyco was engaged in during that time, and a scheme involving transactions with no economic substance to overstate its reported financial results by at least one billion dollars. Tyco's improper acquisition accounting included: undervaluing acquired assets, overvaluing acquired liabilities, misusing accounting rules concerning the establishment and utilization of purchase accounting reserves (Tully, 2004). For example, in 1997 Tyco merged with ADT based in Bermuda to escape paying taxes. Kozlowski structured the deal as a reverse takeover, with ADT acquiring Tyco. Tyco's head-quarters--and its overseas profits--moved to Bermuda, saving the company between $400 million and $800 million annually in U.S. income taxes. That same year Kozlowski established another lavish corporate headquarters in Boca Raton.

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