"Acquisitions have always been a major component of our growth strategy at Dover. This will continue in the future as we broaden our search for successful, well-run companies."

Tom Reece
Chairman & Chief Executive Officer, Dover Corporation

The purpose of this document is to provide some insight into Dover’s culture and operating philosophy, particularly concerning acquisitions.

We also describe several specific transactions as examples of how the acquisition process works.

Many Roads: one destination

In seeking potential acquisitions, Dover looks for well-managed companies that manufacture products purchased by industrial or commercial customers. These companies, in turn, may be in the market for investment capital, leverageable operating capabilities, or technical support.
  Companies that are first in their niche markets are attractive candidates for acquisition; such historically successful enterprises fit well within Dover’s decentralized corporate structure.
  No acquisition follows an identical pattern. Dover acquires some companies as independent stand-alones; others become part of the Dover organization as add-on companies to an existing business. Both routes to Dover have worked extremely well for the businesses involved. One way may be right for your company.

What makes a Dover company?

Starting in 1955 with four companies, Dover today is comprised of about 50 independent operating companies. Most are number one in their niche market. Each manufactures products to be purchased by industrial or commercial customers. And, each consistently outperforms its competition.
   Companies are "Dover like" based on how well they are run rather than how well they fit into a formal model or theory of growth.
   Dover doesn’t demand synergy among its various companies. Dover has always taken the position that its role is not to develop operating strategies; that responsibility is left to company management teams.
   Allowing skilled entrepreneurs the scope to do what they do best—run their companies and find new ways to grow them—has paid off handsomely for Dover Corporation and its stockholders. Dover has enjoyed strong and continuous growth since its inception—sales and earnings have grown about 14 percent compounded annually since 1955, and stockholders’ returns on their Dover investment have consistently surpassed the S&P 500.

"It takes patience and persistence to identify Dover-like acquisition candidates."

Tim Sandker
President & Chief Executive Officer, Dover Industries

With Fred Durham (seated), CEO from 1956 to1966, are the three succeeding CEOs: Tom Sutton from 1966 to1981, Gary Roubos from 1981 to1994 and Tom Reece since 1994.

A proven formula for success

To understand Dover’s operating style, it helps to know something of the company’s history and the role played by its leaders over the years. Dover traces its roots to a group of investors led by George Ohrstrom, Sr. A high-flying investor in the ’20s who, like many others, reaped some failures in the ’30s, Ohrstrom ultimately hit upon a conservative but successful investment strategy. He sought out financially successful family or closely-held businesses whose owners not only wished to monetize their assets but also hoped to provide a secure future for their employees and remain personally involved with their companies. At this stage in his life Ohrstrom himself had little interest in presiding over complex bureaucracies. He wanted a group of modestly-sized, profitable enterprises run by first-class people who understood their businesses and customers and who could continue to be successful.
  Ohrstrom’s earliest acquisitions—Rotary Lift (a manufacturer of automotive lifts), C. Lee Cook (a manufacturer of compressor components), Norris (a manufacturer of oil and gas production equipment), and Peerless (a manufacturer of gas fired space heaters)—each fit this description. They had a simple approach to manufacturing products for niche markets. Each was highly profitable with strong cash flow. Each would continue to be run by the same management team after joining Dover.
   These four companies combined to form Dover Corporation via an Initial Public Offering (IPO) in 1955. From this nucleus the Dover culture has been crafted by the four CEOs who succeeded George Ohrstrom who died shortly after the IPO. While preserving the founding philosophy, each leader has made his own indelible contribution to building the Dover of today.
   Fred Durham, Dover’s first CEO, set the example. Durham, who had sold C. Lee Cook to Ohrstrom and remained as president, firmly believed that the key job at Dover was that of president at each of the operating companies. Right from the start, he set the tone of keeping corporate functions and staff to a minimum.
   Tom Sutton, Durham’s successor and the company’s second CEO, had previously been president of Dover’s OPW business. Another zealous advocate of decentralized management, Sutton was instrumental in Dover’s significant growth during his 15-year term. In order to supplement internal growth, Sutton focused on attracting new companies to Dover and initiated the active acquisition program which remains a cornerstone of Dover’s growth strategy.
   Gary Roubos, president of Dieterich Standard when he brought it to Dover on behalf of the principal owner in 1975, became CEO in 1981. He reorganized the company into the four Independent Subsidiaries. Each Independent Subsidiary was to be like Dover in the way it operated. It is to these Subsidiaries—Dover Diversified, Dover Industries, Dover Resources, and Dover Technologies—that the individual operating companies now report. Under this format, the Subsidiaries became clones of Dover to further extend and decentralize the acquisition program.
  Current CEO Tom Reece is the former president of three Dover companies: Ronningen-Petter, De-Sta-Co and Norris. Under his leadership Dover has accelerated its tilt toward growth by placing a greater challenge on the company presidents to grow their businesses. As a direct result of this initiative, strategic add-on acquisitions by Dover’s independent operating companies have greatly increased. There has also been a significant increase in strategic growth initiatives including joint ventures and international expansion projects.

"In technology-intensive acquisitions, we seek companies that can be platforms for future investment or add to the growth of existing platform companies."

John Pomeroy
President & Chief Executive Officer, Dover Technologies

"Successful acquisitions depend on retaining and motivating top-flight management teams."

David Ropp
President & Chief Executive Officer, Dover Resources

A lean headquarters staff

Dover leaves to its independent operating companies many management tasks typically handled by corporate headquarters. By managing their own human resources, legal affairs, engineering, research and development, strategic planning, purchasing and marketing, Dover companies can proactively respond to changing customer needs without becoming entangled in bureaucratic red tape. In fact, all but about 50 of Dover’s approximately 30,000 employees work directly for one of its operating companies.
   Why does Dover’s corporate staff remain so small? First, it is much easier to keep corporate functions from multiplying when there is very little bureaucracy to begin with and no one has any turf to defend. In addition, because Dover is comprised of many companies, each serving a unitary market with only targeted product offerings, there is little need for integration or coordination of functions across company lines. The bottom line is that, at Dover, it is expected that the president of each operating company has the ultimate responsibility for the healthy growth of his or her business. In this environment, corporate bureaucracy would only get in the way.

An organization of leaders . . . linked by trust

The Dover culture is founded on trust based on mutual respect. Within Dover, a company presidency is not a stepping stone to other positions. Rather, it is the pinnacle of importance for each individual company and for Dover itself. Dover’s company presidents set the direction for their own companies, make their own decisions, and nurture and grow their own organizations.
   The expectation is, of course, for excellence. Most Dover companies enjoy robust growth. Outstanding financial performance is the norm, and monthly results at each company are shared throughout the organization. Company presidents are continually challenged to improve and perform well in their own industry as well as among their peers at Dover.
   For 45 years, Dover’s decentralized management style and policy of acquiring high quality manufacturing companies with a commitment to excellence have produced long-term earnings growth, high cash flow and superior returns on stockholders’ equity. Dover continues to seek new and compatible businesses with management teams that can prosper within our decentralized operating environment.
  Typically, these management teams are enriched by the opportunity to freely and openly share experiences with their peers from other Dover businesses.

"Successful Dover companies are market leaders committed to continuous improvement."

Jerry Yochum
President & Chief Executive Officer, Dover Diversified

Searching For The Right Fit

"High quality earnings growth" is a watchword at Dover. That’s why our business strategy can be simply stated: we support the growth plans of our existing businesses while utilizing our strong excess cash flow to acquire new Dover-like companies.

Our criteria for acquisition candidates is straightforward:

• We seek manufacturers of high value-added engineered products.
• Our focus is on components, equipment and machinery sold to a broad customer base of industrial and/or commercial users.
• We prefer niche-oriented market-leading companies with either #1 or a strong #2 market position.
• Dover-like companies have a strong ethic of focusing on customers and providing high value-added customer solutions.
• Candidates should have strong national or, preferably, international distribution.
• We usually expect the management team to stay in place.
• We typically acquire only those companies with demonstrated outstanding financial performance records and solid prospects for future growth.

"We take pride in our acquisition program. We know it must balance the interests of many parties, and we work hard to make that happen."

Bob Tyre
Vice President, Corporate Development, Dover Corporation

If our acquisition criteria sounds rigorous, it is! On the other hand, once a company joins Dover, our intention is that it remain forever. It is important for each side to avoid mistakes. The fit must work both ways for acquisitions to be successful.
   Although acquisitions at Dover never follow an identical pattern, they tend to fall into two broad categories. Dover acquires some firms as independent operating companies—these we call "stand-alones." We also acquire businesses which will become part of an existing stand-alone company—these we call "add-ons." Either path to Dover can be appropriate, depending on the circumstances of individual companies. Both acquisition models have worked very well in the past. The two can be differentiated this way:

Stand-Alone Acquisitions:

Typically, these are larger businesses which fit the Dover mold but offer no synergy with existing Dover companies. Stand-alone companies report directly to the Dover Independent Subsidiary whose CEO leads the acquisition team. The criteria used to judge these acquisition opportunities is very strict, and Dover’s reliance on existing management is greatest in these situations.
   Our approach has been to make few, if any, changes in stand-alone acquisitions and to have the ownership transition virtually transparent to the marketplace. We look at stand-alone candidates as platforms for growth, offering opportunities to further investment through capital expenditures and/or additional add-on acquisitions.

Add-On Acquisitions:

The characteristics of these companies can vary greatly. The primary criteria here is that the candidate fit the strategic needs of one of our existing companies. Unlike stand-alones, these add-ons should offer synergistic opportunities to improve performance. In some cases, very few changes are made to the acquired business since its operations and products are viewed as complementary. At other times, add-on companies are integrated extensively with an existing company and significant changes are introduced. Since add-ons become part of an existing Dover company, that company president leads the acquisition team.

Dover is a growing family of successful companies and we look forward to meeting new opportunities.