As the Dow Jones Industrial Average plunges into oblivion and dismal corporate headlines are the daily norm, Abbott Laboratories quietly goes about its business, not making waves, doing what it does best -- operating a solid company built on dozens upon dozens of deals.

The Abbott Park, Ill., maker of medical technology, drugs, diagnostic testing and nutritional products has executed more than $20 billion in transactions since chairman and CEO Miles White took charge a decade ago. On average, the company does about 20 deals a year, which includes everything from acquisitions, licensing transactions, divestitures of noncore assets and investments in emerging healthcare startups.

Abbott's largest deal so far was its $6.9 billion buyout of Knoll AG, the drug division of Germany's BASF SE, in 2001. But in the period we studied for our Most Admired Corporate Dealmakers survey, which ran from Jan. 1, 2005, to June 30, 2008, two other deals stand out: the nimble purchase of Guidant Corp.'s vascular business for $4.6 billion in 2006, made possible when Boston Scientific Corp. outbid Johnson & Johnson for the rest of Guidant; and the acquisition of specialty pharma Kos Pharmaceuticals Inc., a cholesterol-control company, for $3.7 billion the same year.

While White and Abbott's other top brass get most of the credit, the nitty-gritty work of finding these deals and carrying them through to completion falls on the shoulders of Sean Murphy and his 45-member deal team, which takes direction from management and then uses its professional contacts and expertise to make things happen.

"What separates us is we are very pinpoint-directed at companies," says Murphy, vice president of licensing and new-business development and a 28-year Abbott veteran. "We go to the grocery store with a very specific list -- and we do not come back with anything that's not on the list."

Their performance is paying off in a painfully tough year. Over the past 12 months, the company's stock has dropped only 9%, compared with the S&P 500 index's 52-week drop of 48%. Abbott's sales for the third quarter this year rose more than 51%, to $1.08 billion, compared with $717 million in the year-ago period.

And its net earnings surged more than 39% for the quarter ended Sept. 30, surpassing Wall Street's expectations.

"Strategically, they have made some good choices by targeting growth areas and finding technologically strong or innovative assets within them," says Martha Freitag, an analyst with Argus Research Co.

Those "good choices" run the gamut. The deal for Guidant's vascular business gave Abbott the drug-eluting stent Xience V, which U.S. regulators approved in July and is the market-leading DES here and in Western Europe. It also brought in John Capek, who came aboard as head of Abbott's vascular business and is now executive vice president, medical devices. The Kos deal included the popular Niaspan, a cholesterol drug that accounted for $565 million in sales for the first nine months this year.

In 2004, Abbott acquired TheraSense Inc., a blood glucose-monitoring business, for $1.2 billion in cash. And the 2001 deal for Knoll brought its arthritis pharmaceutical Humira, now Abbott's fastest-growing drug. Launched in 2003, Humira had sales of more than $3 billion last year and is expected to post more than $4.4 billion in sales in 2008.

Abbott has also made some key divestitures. In 2004 it spun off Hospira Inc., its low-growth commodity hospital products business in Lake Forest, Ill., as an independent, publicly traded company. In September it agreed to sell its spinal devices business to orthopedic company Zimmer Holdings Inc. for $360 million. And in March this year Abbott ended its 31-year U.S. joint venture -- TAP Pharmaceutical Products Inc., of Lake Forest -- with Japan's Takeda Pharmaceutical Co. Ltd. In the deal, Abbott received rights to the prostate cancer drug treatment Lupron Depot.

Murphy says his deal team concentrates on the four main areas of the company: pharmaceuticals, medical devices, diagnostics and nutritional products, with about half of the team working on the company's pharma deals, since drugs represent Abbott's biggest business. Business leaders approach Murphy's team looking to fill portfolio or pipeline gaps or wanting to watch particular business segments for hot deal prospects.

"If you look back at most of our deals, we have very established relationships with our targets," he says.

The company follows potential targets for years. Indeed, Abbott had been running deal models on Guidant's vascular business for a decade when the opportunity to acquire the business arose as a condition of Guidant's $27 billion sale to Natick, Mass.-based Boston Scientific. No wonder Abbott was able to move quickly. Freitag says the Abbott team "should be credited with its ability to quickly seize the opportunity opened by the unraveling of Johnson & Johnson's deal with Guidant in order to gain the vascular business."

Murphy says his deal team doesn't "scour the Earth for deals," but rather knows what it wants and goes after it. Abbott looks first at whether a particular transaction fits the company's strategy and then at how the deal would affect the company's earnings, growth and returns for shareholders. "Abbott historically has been a very, very strong financially driven company," he attests.

Outside observers praise the company particularly for its choice of targets and strategy, the prices paid for deals, its skill in executing and integrating and the quality of the deal team.

"Abbott has delivered a 26.02% return on equity, which is on the high end when compared to its peers," says Daniel Ruppar, industry manager for pharmaceuticals and biotechnology at research and consulting firm Frost & Sullivan Inc.

Still, sources say the company faces some risks, particularly as it increases its emphasis on pharmaceuticals, an industry that has been hard hit this year. Roughly 80% of Abbott's operating profit comes from drugs, and the company has been immersed in various lawsuits for years. On Nov. 20 the company said in a regulatory filing that it would pay $184 million to settle litigation over its cholesterol-lowering drugs, causing its stock to plummet by almost 8%.

The company also faces stiff competition from rivals Merck & Co., of Whitehouse Station, N.J., Johnson & Johnson and others and has more than $10 billion in debt, partly from its acquisition of Guidant's vascular business.

Thus it may come as no surprise that Abbott's executives say that after years of dealmaking, the company is satisfied with its portfolio and is now more focused on internal research and development and organic growth than pursuing more acquisitions.

At the Credit Suisse Healthcare Conference in November, CFO Tom Freyman said attractive valuations wouldn't change the company's mergers and acquisitions strategy. "The good news is we don't have to do any more M&A to deliver on our commitments," he said. - Cheryl Meyer

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