A Blast of Realism
Indeed, while experts predict a continued slowdown in merger activity, companies such as Tyco and General Electric Co., which have strong balance sheets and aggressive internal acquisition teams, may see a pickup. Certainly, Swartz doesn’t discount the possibility that the number of deals may increase, even if they are smaller on average. “We are well positioned right now,” the CFO says, noting the upgrade from Standard & Poor’s Corp. (from A- to A) that reduced Tyco’s cost of funds last spring.
In fact, Swartz says he’s noticed more acquisition candidates raising their hands to catch Tyco’s notice. And he insists that his basic wish list has not changed. First on that list, he says, is the ability to cut costs at the target operation. “We never predicate based on top-line growth,” he says, “and we are risk-averse. Our approach to acquisitions historically has been that every acquisition has risk in it. So everything we do is designed to decrease that risk—from due diligence, to conservativeness in estimating revenues and cost reductions, to making sure we pay a reasonable price.”
Before long, the concentration on price could even mean a return to candidates in the electronics field, where the prices companies were asking during the first eight months of 2001 seemed quite high. “September 11 has hit home with many of these [corporate] sellers,” says Swartz. “They’re becoming more realistic.”
The hits keep coming in Tyco’s acquisition binge.*
|Company Bought (Month Completed)||Price||Terms||Division|
|C.R. Bard (Expected 12/01)||$3.2 bill||Stock||Health care|
|Sensormatic (Expected 11/01)||$2.3 bill.||Stock||Fire & security|
|CIT (6/01)||$9.2 bill.||Stock & Cash||Financial|
|Simplex Time Recorder (1/01)||$1.1 bill.||Cash||Fire & security|
|Lucent Power Systems (12/00)||$2.5 bill.||Cash||Electronics|
|Mallinckrodt (10/00)||$4.2 bill.||Stock||Health care|
|Thomas & Betts Electronic OEM (7/00)||$750 mill.||Cash||Electronics|
|Siemens Electro Products (11/99)||$1.1 bill.||Cash||Electronics|
*includes only deals of $750 million or more.
Source: Tyco International