Dover Corporation

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Dover Corporation

280 Park Avenue
New York, New York 10017
U.S.A.
(212) 922-1640
Fax: (212) 922-1656

Public Company
Incorporated: 1955
Employees: 20,049
Sales: $2.12 billion
Stock Exchanges: New York London

Dover Corporation is a diversified manufacturing holding company composed of about 45 subsidiaries with about 40 lines of industrial products. Dover’s management implements a distinctive approach: subsidiaries are allowed to operate with almost complete autonomy. Dover-subsidiary managers operate with great independence and are rewarded on the basis of long-term earnings growth and return on investment of individual businesses. The company is often thought of as a portfolio of companies rather than a conglomerate because of its hands-off organizational structure and philosophy of management. Dover-owned companies manufacture a range of industrial products, supplying the building industry and the electronics, petroleum, industrial, and aerospace markets.

Dover is split into six groups. Five of the groups are independently operating subsidiaries. The sixth group is comprised of companies reporting directly to headquarters and called corporate companies. Dover’s five major subsidiaries are Dover Elevator International, Dover Technologies, Dover Resources, Dover Industries, and Dover Diversified. The company is the largest producer of new elevators in the United States. It is also the second-largest in Canada and the third-largest in the United Kingdom. The elevator business provides over one-third of Dover’s profit.

Dover Corporation was formed in 1955, when New York stockbroker George Ohrstrom Sr. recruited Fred D. Durham to manage four companies he had bought in the 1930s and 1940s. One of those companies was C. Lee Cook Company, a maker of seals and piston rings for compressors. C. Lee Cook had been built largely by its owner and president, Fred Durham, before being sold to Ohrstrom. Durham was made Dover’s first president in 1955.

Dover was originally composed of four companies: Cook; Rotary Lift, a manufacturer of automotive lifts; W.C. Norris, a maker of sucker rods for oil-well pumping; and Peerless, which was sold in 1977. Cook, Rotary Lift, and Norris in 1991 were still part of the company.

Dover’s corporate offices, opened in 1955, were in Washington, D.C. In December of that year 930,000 common shares of Dover stock were listed on the New York Stock Exchange. The stock split in a ratio of 3 for 2 in 1965, and has split a number of times since.

Dover’s corporate culture was molded by Durham, who felt that “business, like any other human enterprise, thrives best where creativity and initiative are encouraged in an atmosphere of maximum autonomy.” Durham set out to give Dover an environment in which executives could work creatively and without the hindrance of bureaucracy. As Durham intended, autonomy, decentralization, and a minimal corporate staff have become Dover’s hallmarks. At the end of Dover’s first year of operation the corporate staff consisted of three people, including Durham. In 1990 the New York headquarters employed 22 people, including executives.

Each division functions independently with its own president and board of directors. Between 1955 and 1979 Dover bought 14 companies, mostly privately owned or controlled. As part of Dover, the acquired company retains much of its autonomy, and, in most cases, its pre-acquisition management, while benefiting from Dover’s financial strength. At first Dover’s corporate office assumed the role of central banker, monitoring subsidiaries’ fiscal plans and overseeing capital spending in order to insure high return on capital. Divisions were encouraged to keep cash flow heavy, in order to keep debt low and allow Dover to take advantage of acquisition opportunities and give divisions financial help when needed. The corporate office handled all financing.

The 1958 acquisition of the Shepard Warner Elevator Company gave Dover entry into the electric-elevator business. The purchase of Hunter-Hayes Elevator Company and Reddy Elevator Company in 1964 solidified Dover’s position in that industry. For years Dover was number three in the U.S. elevator industry, behind Otis and Westinghouse.

In 1961, Dover bought Cincinnati, Ohio-based OPW, the leading U.S. maker of service station nozzles and other hazardous-fluid-handling equipment. When Fred Durham reached age 65 in 1964, OPW president Thomas C. Sutton was elected Dover’s third president and chief executive officer. Dover’s second president, Otto G. Schwenk, had served from 1961 to 1962. Schwenk was let go when Dover company presidents, united in opposition to his attempts to expand the corporate staff, threatened to resign. Also in 1964, Dover’s corporate headquarters were moved to New York.

Under Sutton’s leadership Dover experienced tremendous growth. Sales leaped from $68 million in 1964 to $835 million in 1981. Sutton stuck closely to Durham’s management philosophy, and eliminated the corporate position of internal auditor. To Dover’s nucleus of well-managed companies many others were added, in accordance with a policy that required acquisitions to display such qualities as product excellence, market leadership, strong management, and high return on capital.

Throughout the 1960s Dover’s product base was expanded through acquisitions into a wide range of areas. Major purchases include De-sta-Co, a toggle clamps and flapper valves producer bought in 1962; the 1964 acquisition of Blackmer Pump Company, a maker of industrial pumps; Groen Manufacturing, a maker of steam-jacketed kettles and other equipment for the food-service industry, purchased in 1967; and Ronningen-Petter, which produced filter-strainer units, was bought in 1968. Also in 1968, Dover spun off its Dura-Vent subsidiary to employees. The Dura-Vent sale demonstrated another important facet of Dover’s corporate strategy: divestiture of non-core businesses. Dover’s 1966 acquisition of Turnbull, however, was not executed as seamlessly. The Turnbull acquisition negated corporate growth for two years as Dover’s elevator division struggled to digest Turnbull.

During the 1960s the company began to export a broad range of its products through independent distributors and, later, through its own subsidiaries. During the 1960s and 1970s Dover operated primarily in the building industry— mostly elevators—the petroleum-services-equipment industry, and manufactured goods for various industrial uses.

In 1975 Dover acquired Dieterich Standard Corporation, a Denver, Colorado-based manufacturer of liquid-measurement instruments. Dieterich president Gary L. Roubos came to Dover with Dieterich. Roubos, with a background in chemical engineering and business administration, was elected Dover’s president and chief operating officer within two years of the Dieterich purchase. In 1981 Roubos was named CEO, and in 1989 he became chairman. Roubos continued his predecessor’s winning strategy. Acquisitions were typically small companies, mostly bought in exchange for cash. They were market leaders, or had proprietary lines that meshed with Dover’s existing businesses and had good growth prospects. Dover acquisitions, almost without exception, have had higher-than-average returns on invested capital. Beginning in 1963 and into the early 1980s the company averaged one non-elevator takeover a year. In the years Roubos served as president, from 1977 to 1989, sales doubled from $1 billion to a little over $2 billion. Difficulties in assimilating Weaver, an automotive lift company, caused that company to be shut down. Typically divisions that have been sold were not a good fit with Dover’s other product lines.

In July 1979 Dover acquired Universal Instruments Corporation of Binghamton, New York. Universal, the world’s leading manufacturer of automated assembly equipment for electronic circuitry, moved Dover into the electronics business. By 1989 Dover Technologies, Dover’s electronics division, owned 12 companies. By 1980 the electronics market had become the second most important growth area for Dover, following petroleum-production products. During the 1980s, with the industry moving toward electronic-circuit miniaturization and cost reductions and quality enhancement through use of computer-controlled automation, Universal’s sales soared.

Although petroleum-production and -marketing equipment was Dover’s fastest-growing segment during the 1970s and 1980s, it was sensitive to the volatility of deregulation, environmental regulation, and pricing by the Organization of Petroleum Exporting Countries (OPEC). The Norris division’s sucker rods for lifting oil from wells were prey to the cyclical nature of the oil-drilling business and to the deregulation of the gasoline business. By the early 1980s, with the country in the midst of a recession, demand for oil-production equipment, an area that had comprised one-third of pretax profits, was sluggish. For instance, OPW, the leading supplier of gasoline-pump nozzles, had experienced rapid growth during the 1970s, with the installation of new pump nozzles for unleaded gasoline and the conversion of many gas stations to self-serve. Rotary Lift had done very well in the automobile-service industry during the 1970s; a number of mass-merchandisers were entering the automobile-service business and buying machinery from Rotary Lift. Recessionary pressures in the early 1980s, however, deterred purchases in the automotive service and repair industry. The diversity of Dover’s product line, and moves into such areas as electronics, aerospace, and other growth areas, have helped cushion the company against such economic swings.

While Dover continued to grow under Gary Roubos’s leadership, its size and complexity began to hamper its approach. Thus, in 1985, Dover’s management was restructured. The resulting arrangement created five major subsidiaries, each with between five and nine of its own related subsidiaries headed by a chief executive officer. The presidents of the approximately 40 companies that comprised Dover reported to the CEO of one of the five subsidiaries. The five subsidiary chiefs reported to the Dover CEO. Each subsidiary continued to seek to add complimentary acquisitions. The five subsidiaries were divided into four business sectors for reporting purposes. The sectors created in 1985 reflected the principal areas of market activity. They were building industries, comprised wholly of Dover Elevator International; the electronic products segment, representing Dover Technologies; the petroleum industry sector, representing Dover Resources; and industrial and aerospace products, comprised of the Dover Industries and Dover Sargent subsidiaries.

In 1989 Dover again revised its structure, into six sectors, to reflect shifts in market activity. Since the 1985 restructuring, distinctions created among petroleum, industrial, and aerospace companies had become increasingly blurred and decreasingly descriptive. The six sectors created in 1989 were Dover Elevator International, Dover Technologies, Dover Resources, Dover Industries, Dover Diversified, and Corporate Companies. All sectors except Corporate Companies are also subsidiaries in their own right. True to character, each subsidiary office has three to five employees.

Dover bought about 25 companies between 1985 and 1989, for $460 million, but has taken on relatively little debt. In general, Dover’s capital expenditures are financed with internally generated resources. The results are impressive, as evidenced by Dover’s low debt, excellent long-term growth, and consistently above-average return on equity. In 1989 the company made no acquisitions, for the first time since 1980.

During the late 1980s and into 1990, market conditions in the defense-electronics industry had been highly competitive, and performance of Dover’s six defense-electronic companies had been weak. At Universal Instruments 1989 profits declined 36%, and Nurad suffered an $8 million loss in the commercial radio market. Dover had responded to the flat market conditions by making management changes, ending Nurad’s involvement in the commercial radio field, and trimming back operations. Beginning in 1988, Nurad was also the subject of a criminal investigation of its activities as a government contractor.

Dover’s net earnings declined 1% in 1989 on a sales increase of 9%, while earnings per share increased 3% due to the company’s ongoing share repurchase program. Dover management expected ailing sectors to rebound in 1990. Despite the short-term earnings drop, Dover continued to operate smoothly and profitably into the 1990s.