Henry Singleton’s Teledyne is one of the greatest business success stories there is.

The conglomerate was born in the early 60s by the acquisition of a single company with less than $1 million in revenue. Over the next 15 years, Henry Singleton acquired around 125 (or 145 or 130 there are several different estimates) other companies to add to the group and by the mid-70s, these bolt-on acquisitions had driven Teledyne’s revenue to $1.7 billion.

 

Get The Full Seth Klarman Series in PDF

Get the entire 10-part series on Seth Klarman in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

We respect your email privacy

 

Henry Singleton
The explosive growth of Henry Singleton's Teledyne

Revenues of $1.2 billion were reported for 1970. By 1974, revenues hit $1.7 billion. Two years later, revenues had jumped a further 12% to $1.9 billion and by 1979, revenues surged to over $2.6 billion. From 1969 through to 1978, Teledyne’s revenue jumped 89%, net profit more than triple and earnings per share, thanks to the constant tender offers and buybacks, soared 1,226%.

However, Teledyne was always a somewhat secretive operation, giving investors a little in the way of information on its various operating businesses and subsidiaries. In various interviews over the years, Singleton offered some insight into the business but never truly provided a breakdown of the operating divisions for readers and investors.

During 1978 this changed when, in an interview with Forbes magazine, Singleton broke out the figures for some of his operating units partly to show how successful the businesses had been over the years and partly to show how Teledyne operated.

The explosive growth of Henry Singleton's Teledyne

Teledyne as a group reported explosive sales growth over its life and after the initial acquisition spree, most of this revenue expansion came from organic growth. For example, the group’s offshore drilling unit reported sales of $10 million when it was acquired in 1966. By 1978 sales had grown eightfold to over $80 million. Another example, Teledyne Water Pik reported sales growth of 1,525% between 1966 and 1978.

It could be said that Warren Buffett’s Berkshire Hathaway was built in the shadow of Teledyne. Indeed, Singleton used many of the business growth and development strategies Buffett still uses today. One example is the acquisition of Monarch Rubber, a family run business, which sold steel and rubber products for the automotive industry. Management was good at its job, although the business was suffering from a chronic lack of underinvestment. After acquiring the business, Teledyne poured capital in to modernise and expand, management carried on doing what they were doing and between 1969 and 1978, sales jumped from $30 million to $80 million. Singleton used a similar strategy with Merla Manufacturing, which was acquired for only $80,000 with sales of $30,000 a month and was on track to do $15 million of sales for 1978.

All of the businesses under the Teledyne umbrella had similar stories. Wah Chang (a producer of metals used in nuclear reactors) was brought out of bankruptcy in 1967 and by 1977 had nearly tripled sales. Allvac, which vacuum melts metals, saw sales grow from $1.5 million in 1964 to over $40 million by 1978. And Singleton wasn’t afraid to change a firm’s operating model if he believed better returns could be achieved in another line of business. In 1964 Teledyne moved three small bolt-on electronics companies into one plant, liquidated their entire product lines and turn to producing a new product suggested by a chief engineer of one of the outfits. In in 1977, these old businesses with a new product churned out more in profit than Teledyne paid for all three combined.

Henry Singleton was a master of business, and the operating performance of Teledyne’s subsidiaries shows how tuned in he was, not just to the big decisions such as capital allocation but also the day-to-day management of operations.