AlliedSignal Engines and Textron Lycoming
This case deals with the strategic evaluation of a proposed acquisition. AlliedSignal's aircraft engine division is considering a bid for the aircraft engine business of Textron, Incorporated. AlliedSignal has a dominant position in various segments of the global aircraft engine business. Kelly Isley, a business analyst at AlliedSignal, has been asked to prepare an analysis of the potential strategic fit between the two firms and a recommendation as to whether or not AlliedSignal engines should proceed towards the acquisition. If her recommendation is positive, AlliedSignal will then proceed to do an in-depth financial evaluation of the acquisition.
Although the case deals with a proposed acquisition, the focus is on strategic issues. The financial issues are clearly important but will not be examined in detail by AlliedSignal until there is a clear strategic rationale for moving forward. The key question in the case is to examine the industry and determine if the combination of AlliedSignal and Textron Lycoming makes sense. Students are expected to develop an understanding of the aircraft engine industry and future competitive pressures and then use this understanding to evaluate the proposed acquisition.