You'd expect the folks at General Electric Co. to have a first-rate process for choosing and executing transactions, and they do. But the thing that really sets GE apart is the process for improving the process -- that is, the way the company takes advantage of its huge scale, varied businesses and constant dealflow to compile lessons and build expertise throughout the organization. "We're a learning culture," says Pamela Daley, General Electric's senior vice president for corporate business development.

That's more than a slogan. As well known for developing executive talent as it is for buying and selling businesses, GE spends about $1 billion per year on employee education. Inevitably, dealmaking and deal-related issues make up an important part of the curriculum, and not just for the 200 or so business development professionals working in the many business units and at corporate level. Business managers and people in functional areas (such as legal, finance, human resources) also study -- and teach -- on deal-related topics.

To be sure, the business development organization is the hub of all this transactional know-how. Led by Daley since 2004, it reflects what she calls GE's federal structure, with 20 to 30 biz dev professionals at corporate level and the rest working in the business units -- "a very powerful set of states," as she puts it.

Daley moved into her current job from GE's legal department, which she joined as a tax lawyer in 1989. She became senior counsel of transactions in 1991. It was the Jack Welch era -- a great period for GE deals and also for GE's legal organization, which under general counsel Ben Heineman Jr. brought in talent and built a reputation as a sort of major league law firm that happened to have just one big client.

The business development organization has changed over the years as well. Two decades ago, Daley says, people tended to spend less time there, with the roster dominated by aspiring business leaders doing a stint on their way up the corporate ladder. Now there's an increasing effort to make sure the organization is populated by experts, something that's accomplished both through selective outside hires (mainly at the corporate level) and also by creating an opportunity to stay for 10 or 15 years, or even a whole career.

Business strategy still drives the deals, though. "If there are 10 items on the list," says Daley, "the first eight are about strategy." There's a strategy-setting exercise for each business, performed annually but continuously updated. With that as a backdrop, CEO Jeff Immelt and the senior leadership team meet monthly with the business leaders to go over the deal pipeline with each. What's new with the top acquisition candidates in aerospace and energy? What are the top partnering ideas in media and healthcare? What are the top candidates for divestiture?

This state of readiness paid off in GE's biggest acquisition during our survey period, its purchase of the aerospace division of Smiths Group plc for $4.8 billion in January of 2007. The largest maker of aircraft engines, GE had long aspired to move its aerospace business "off the wing and into the plane," Daley says, and the Smiths operations (including flight management and computing systems) would accomplish that at a stroke. When the division suddenly became available -- and a supplier relationship plus other ties enabled GE to pre-empt an auction -- it could move swiftly, signing the deal in about a month.

Not that getting to yes that fast is, in and of itself, such a great feat. The hard part is getting there with GE's trademark quantitative rigor, which starts in the models it keeps at the ready for likely targets and runs through due diligence and on into integration and regular reviews of past transactions.

Here, a simple and powerful practice helps GE. As in most big companies, a manager who advocates an acquisition prepares a detailed business case for it, working in partnership with business development folks. But once the deal gets Immelt's OK -- which nearly all deals require -- the manager takes ownership of the numbers in a very real way, since they are plugged right into the unit's business plan.

Says Daley: "This highly vetted business case is essentially a promise that that's what they're going to deliver."

When it comes to divesting -- and GE actually did more selling than buying in the period we studied -- corporate business development takes a bigger role. Preparation is paramount, and as Daley describes the sale of GE Plastics to Saudi Basic Industries Corp. for $11.6 billion in May of 2007, the company's process orientation is much in evidence.

The groundwork for a successful auction was laid in three months of detailed work on the myriad issues that need to be settled for a business to be separated, from transition services agreements to intellectual property rights management to provisions for employee retention. Standalone financials were created and an audit begun. "By the time we had the first substantive contact with any bidder," Daley says, "we had a completely populated data room with tens of thousands of documents in it."

For the plastics sale, and for the November 2005 sale of GE Insurance Solutions (which Swiss Reinsurance Co. bought for $8.5 billion), GE also had good timing. In the former case, it helped to go to market when private equity firms could still bid. In the latter, GE managed to exit a capital-hungry financial business well ahead of the current storm.

Yet for all GE's skill at transactions, the corporate transformation of which those deals are a part has yet to impress investors. Daley and her team have already helped accomplish change on a scale to be found only at GE. But the work continues, even as the financial crisis increases the pressure on GE, a financial as well as an industrial giant.

In May, Immelt put GE's appliances business on the block, and when buyers proved cautious, said he would opt for a spinoff of the entire commercial and industrial division. Some also argue that GE should sell its NBC Universal Inc. unit, but Immelt insists he'll keep it.

The company got a welcome vote of confidence through a $3 billion investment from Warren Buffett in October, part of a $15 billion fundraising. Investors still worry about GE's exposure to finance, though. GE Capital Corp., which accounted for 42% of 2007 profit, is now being restructured.

Daley, approaching her 20th year at this most transaction-intensive of companies, is unruffled. GE has always been in "a continuous process of portfolio transformation," she says. And being a highly empirical kind of organization, GE would never be so arrogant as to ignore different views about its strategy. "We listen," she says, "and we let that be a part of an informed judgment." - Kenneth Klee

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