What do Abbott Laboratories (NYSE:ABT), Medtronic Inc. (NYSE:MDT), Danaher Corp. (NYSE:DHR) and Illinois Tool Works (NYSE:ITW) have in common? They all make Ted Rouse's list of serial acquirers that do smart deals during economic booms and busts. "There are obviously lots of other companies," says Rouse, co-head of global M&A for Bain & Co., "but those are examples of companies that have worked through the economic cycle and done well over a long period of time."
Rouse helped author a chapter titled "Pursue game-changing acquisitions and partnerships" in the new book "
Winning in Turbulence" from Harvard Business Press. The chapter makes the case for overcoming the instinct to hunker down and horde cash during economic downturns by highlighting the winning strategies of corporations that have done just the opposite. As Rouse points out in
this Q&A in The Deal Pipeline (subscription only), companies that acquire in good economic times and bad outperform those that don't by a wide margin.
So what sets these successful downturn acquirers apart? Rouse says most follow a guiding set of principles that keep them out of trouble when the macro-economy tanks. According to Rouse, those companies:
- have a clear deal thesis that puts on paper the logic of the deal and the assumptions on which it's being pursued,
- conduct transactions that are relatively close to their core,
- avoid swinging for the fences ("The worst performing acquirers," says Rouse, "are those that buy infrequently, and when they do, they do large transactions."),
- buy throughout the economic cycle.
By the way, we'd add to Rouse's list of successful acquirers Cisco
Systems Inc. (NASDAQ:CSCO) and General Electric Co. (NYSE:GE), which along with Abbott Labs,
were named Most Admired Corporate Dealmakers of 2008 in their respective
industries by readers of The Deal. Take
this survey to help determine the 2009 winners, and join us for the awards luncheon during
The Deal Economy 2010 conference Nov. 18 and 19. -
Suzanne Stevens
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Juergen Lasowski
And the winners are...
