Who are the Most Admired Corporate Dealmakers?

Do you know a good strategic deal when you see one? One that was well conceived, ably executed and delivered the intended results? Sure you do. As a member of the deal community -- the transaction-focused corporate executives, bankers, lawyers, private equity professionals, arbitrageurs, portfolio managers and M&A service providers The Deal LLC was created 10 years ago to serve -- you've probably seen dozens of deals up close and many more from nearby. You've watched or participated as various companies have compiled M&A records, and you've formed valuable impressions about what worked and what didn't.

So, once again, we invite you to share those impressions by logging on to the survey site and participating (anonymously, of course) in our annual Most Admired Corporate Dealmakers survey. As we did in 2008, the inaugural year for our online poll, we seek your help in identifying the standout companies in three sectors. This year the industry categories are media, information technology and pharmaceuticals/biotech. You'll find lists of the 10 candidate companies in each sector on the following pages. Supporting tables of the deals each company did in our study period are available online.

See our research on the most transaction-intensive large companies in three sectors: Information technology Media Pharmaceuticals, biotech and life sciences How to participate in the survey Want to spotlight superior work in strategic M&A? Then add your voice to our second annual Most Admired Corporate Dealmakers survey. It takes only a few minutes, and your ratings will be kept entirely anonymous. If you log on to our survey site, you'll be asked to rate the efforts of selected transaction-intensive companies in each of three sectors: information technology, pharmaceuticals and biotech, and media. You can rate companies in as many (or as few) sectors as you feel qualified to judge. To ensure that your response can be counted, please complete the survey by Oct. 9. The survey site contains the same sector lists shown on the pages that follow, and also includes company descriptions and lists of transactions closed by the companies between Jan. 1, 2006, and June 30, 2009. Results will be announced during a Most Admired Corporate Dealmakers Awards luncheon ceremony at our Deal Economy 2010 conference in New York on Nov. 19. We'll also make them available on our Web site and via The Deal Pipeline, and write them up in another magazine article in The Deal. Between now and then, we'll be discussing the survey on the Corporate Dealmaker Web site. Join us there to learn more about the project, to look at last year's results and to make suggestions for next year. A look back at the 2008 survey Maybe timing isn't absolutely everything. After a year of preparation, we held our breath and launched our inaugural Most Admired Corporate Dealmakers survey in the Sept. 22, 2008, issue of The Deal -- much of which was devoted to the bankruptcy of Lehman Brothers Holdings Inc. and the other epic events that had taken place on Wall Street the week before. Would the denizens of the deal community be willing to think about the skills of strategic acquirers in such a climate? Turned out they were. Though we had to keep the survey open a couple of weeks longer than expected, readers came through in sufficient numbers for us to name winners in all three categories. General Electric Co. took the honors in the industrials sector. Cisco Systems Inc. won in information technology. And Abbott Laboratories placed first in healthcare. The latter two companies have a chance to repeat this year, since we're looking at the information technology sector again and also at pharmaceuticals and biotechnology, a subset of healthcare. But they're far from a lock, since the study period is different and both face new competition. And with stability returning to Wall Street and strategic acquirers bringing the deal market back to life, interest should be considerable. By all means, log on to express your own views.

There are some fascinating strategic narratives to be found in the recent deal histories of these companies. But before we invite you to ponder them, it's only fair to recap the thinking that led up to this project and fill you in on how we generated the company lists.

The Most Admired Corporate Dealmakers survey is based on our conviction that dealmaking is an important strategic capability and that companies that do it well deserve to be recognized. The question, of course, is how to identify them.

Quantitative measures of which companies get the best results are problematic, since M&A is so tightly intertwined with other elements of corporate strategy. But qualitative judgements from an informed community, we concluded a couple of years ago, would be well worth compiling.

That presented us with the challenge of figuring out which companies we would ask the deal community to assess. We came up with a selection process that meets three key tests. First, it is data-driven, relying on deal stats provided by our data partner, Standard & Poor's Capital IQ unit, and checked by editors at The Deal against our own Pipeline database. Companies appear on our lists because they are what we call transaction-intensive, not because someone nominated them.

Second, the process looks back at a long enough period of time (specifically, deals closed in the 3-1/2 years ended June 30) that respondents are considering deals that have been tested to some degree. And third, our process lists dealmaking companies within their own industry sectors. That's an important consideration, since an acquisition in, say, pharma can differ in important ways from one in media.

What do we mean by "transaction intensive"? We use a formula that considers both acquisitions and divestitures. The most heavily weighted factors are simply the number and dollar volume of transactions. But we also award extra points to companies that did a high dollar volume of deals compared with their market capitalization on the start date. For simplicity's sake, we consider only deals where the company bought or sold 90% or more of a target. Our stats don't reflect minority stakes, joint ventures and some other kinds of deals that are part of the strategic toolkit for most of these companies, but we don't think the lists would look much different if they did.

In choosing which sectors to examine we do allow ourselves some editorial latitude. Working within the framework of the four-tiered Global Industry Classification Standard developed by MSCI Barra and Standard & Poor's, which Capital IQ uses to organize its data, we chose three sectors that saw significant change and deal activity in the study period. One of them, information technology, is the same as last year, but we thought the ongoing activity in the sector warranted a fresh look. And indeed, three companies on the list weren't there in 2008: Microsoft Corp., eBay Inc. and Motorola Inc.

Another sector -- pharmaceuticals, biotech and life sciences -- is a subset of the healthcare sector we looked at last year. That means you'll rate such stalwarts as Abbott Laboratories and Johnson & Johnson against biotechs such as Celgene Corp. and Gilead Sciences Inc. rather than insurers or pure-play device companies, as was the case last year. The third sector, media, is new for 2009.

Respondents can rate companies in one, two or all three sectors, depending on their familiarity with the industry in question. To further heighten the familiarity factor, we've limited the lists to large, U.S.-based public companies. In information technology and pharma-biotech, companies had to have a market cap of at least $5 billion on June 30, 2009, to be included. In media, where except for a few giants companies tend to be smaller, the market cap cutoff was $1 billion on that date.

A final note on the lists. When you look at the tables of deals credited to the companies (available, as we said, on the survey site) you may notice that the dollar amounts listed under "deal value" occasionally vary a bit from the announced deal prices. That's because this year we've elected to use the metric Capital IQ calls "enterprise value."

As dealmakers know, there's more than one way to quote a price for a deal, and this seems to us the fairest way to tote up prices for the large number of deals we're looking at. Capital IQ defines enterprise value to mean equity value plus net assumed liabilities (including debt, preferreds and minority interest) less cash and short-term investments.

For public targets, Capital IQ generates the number based on the financial records it maintains on the companies. For private targets, it uses the announced number. When deal terms couldn't be calculated and weren't announced (and many of these companies do small transactions where that's the case), we had to exclude the transactions from our study.

Now on to the question of how these companies should be judged. We seek your views on the four basic things that, in our observation, go into making a corporate deal a success. When you take the survey, you'll be asked to rate each company on four criteria:

Overall strategy: rationale for the transactions and choice of targets (or, in divestitures, the business sold)

Quality of the deal team: skills and knowledge base of corporate development staff, line executives, top management and other company participants

Value: price paid (or received) compared with value that can be extracted

Execution: ability or likelihood to capture stated benefits, value and synergies

You'll notice we don't ask you to judge the overall success of the companies. That's surely important, but our objective here is to focus on a skill set that may be necessary for a company to prosper but is rarely sufficient. It's more like asking which baseball team has the best pitching than asking which one will win the World Series.

And especially in an exercise like this one, it's important to remember that (like pitching in the big leagues) deals are difficult. Yes, companies often do them to seize opportunity, but on a more fundamental level they do them in order to navigate change, and not always from a position of strength. This is one reason we include divestitures in our deal totals. In fact, one of our media-company candidates, Time Warner Inc., appears on the list based entirely on a pair of divestitures.

Because our study period concludes June 30, 2009, it takes in an especially grim period for the stock market. The total market cap of the media sector fell 47% in those three and a half years. IT's market cap was off 19%, and pharmaceuticals and biotech was down 16%.

There's more than a little food for thought in how the different companies fared against this backdrop as measured by their own market caps. In all three industries, the 10 most transaction-intensive large companies under- and outperformed the sector in roughly equal proportions. In IT, five companies outperformed and one tied, and of these, four showed gains in market cap. In pharma-biotech, five outperformed, one tied and two were in positive territory. In media, five companies outperformed, with only one in positive territory.

Ammunition for the deals-don't-work crowd, or perhaps a deals-don't-matter splinter group? Maybe, but we think the truth lies much deeper and that as you cast your eye over the strategic journey represented by the transactions each of these companies closed in this eventful period you'll agree.

Because by this time, asking whether deals in the abstract can be thought of as good or bad is a little like asking the same thing about corporate finance or R&D. The point is doing the right ones, and doing them well.

Which companies are meeting that test? That's for you to say.

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