ATS Corporation
A mini Danaher on the cheap!
The Danaher Business System (DBS) is a comprehensive framework used by Danaher Corporation to drive continuous improvement and operational excellence. It focuses on customer needs, leveraging Lean, Six Sigma, and Kaizen methodologies to enhance processes and performance. DBS emphasizes data-driven decision-making, standardized practices, and employee involvement to ensure consistent quality and efficiency. It supports growth and innovation by encouraging experimentation and optimizing operations.
DBS was largely developed and introduced under George M. Sherman, who was CEO of Danaher from 1986 to 2001. Sherman was instrumental in establishing and applying DBS, basing it on the principles of the Toyota Production System (TPS) and Lean manufacturing. These methodologies, renowned for their emphasis on efficiency, waste reduction, and ongoing improvement, served as the foundational concepts for DBS. Consequently, the initial focus of DBS was on boosting operational efficiency.
As Danaher expanded, the Danaher Business System (DBS) evolved to include more than just manufacturing processes. It came to cover a wide range of business areas, such as supply chain management, sales and marketing, and human resources.
A friend in the industry once pitched Danaher to his portfolio manager, but the manager couldn’t grasp the company’s competitive advantage or justify paying a high multiple for the stock. They eventually met with Danaher’s management at a conference and asked a series of detailed questions, but the answers kept coming back to one thing - DBS, DBS, DBS. This is, again, a series of small, continuous improvements applied across every facet of the company. While many companies are aware of this approach, the real challenge lies in embedding it deeply into the corporate culture - a task that is much harder to replicate, but one that drives Danaher's long-term success.
ATS’s current CEO, Andrew Hider, spent a decade at Danaher Corporation, where he held various positions. After joining ATS in 2007, Mr. Hider introduced the ATS Business Model (“ABM”), a business management system that enables progress through a process of disciplined, continuous improvement (“Kaizen”) at its core. The ABM focuses on achieving results in three key areas: People, Process, and Performance. This is driven by adopting a customer-first approach, implementing a performance management system, creating annual operating and capital deployment plans for each ATS division, shortening development cycles, and enhancing production efficiencies. The ABM supports ATS’s progress on eight value drivers: 1) bookings; 2) revenue; 3) EBIT margin; 4) working capital; 5) on-time delivery; 6) quality; 7) internal fill rate/hiring; and 8) employee turnover.
Sound familiar?
Since Andrew Hider took over as CEO of ATS, the stock surged from $10 per share to a peak of $48 in 2023. However, it has since dropped nearly 50%, currently trading around $26 per share. This offers tremendous value to participate in a secular growth industry run by a a team that has been successful in integrating a DBS like system into their culture.