Jbt Case

Recommendation

JBT should not purchase Key Technology’s sorter division.  Current industry analysis, JBT’s investments and JBT’s and Key Technology’s investment analysis have proven that this would not be an acquisition that would make JBT maximize profits.

Reasons

1. Clients Industry

JBT and Key Technology’s clients form part of the global Fruit and Vegetable Processing and Preserving industry.  This is an industry whose revenue growth has decreased the past two years.  

• The industry revenue shrunk by 3.9% in 2009 and 3.4% in 2010.  

• “Rising input costs have put companies in a situation where margins are being squeezed”

• “Produce imports from China grew from $2 million in 1998 to almost $75.4 million in 2009. This increase means less revenue for this industry’s players

These statistics do not show a promising future for the industry in the next couple of years.  JBT and Key Technology’s client base is not expected to grow with this happening. During these times, a big investment such as acquisition must be very carefully evaluated.

2. JBT Financial Profile and Market Conditions

- In 2009

• $32.8 million in net income

• $841.6 in total revenue.

• $786.1 in Total costs and expenses.

• JBT Corporation was forced to capitalize on a variable cost structure in order to adjust businesses to reflect a weaker demand in the industry.  

- In 2008

• $44.2 million in net income.

• $1,028.1 in net revenue [a 25.8% loss].

• $951.2 in total costs and expenses.

JBT’s strategy is to have a well-balanced and diversified product mix and to occupy the first or second position in the majority of markets that they operate in. They believe that this strategy is a recipe for success built on revenue and earnings stability, steady cash flow, and opportunities to grow.

3. Key Technology’s Financial Analysis

According to Key Technology’s recent 10-Q filing, the company’s sorter division or “automated inspection systems” comprised almost $52 million in...