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NAILING 400 deals.

AS THE CEO of a company with a reputation for consuming other companies, L. Dennis Kozlowski knows that what may at first seem like idle chatter is rarely that-idle Whether the setting is a cocktail party; a fundraiser or even a backyard barbecue, conversations with Kozlowski invariably turn to deals, and, more often than not, to potential targets for those deals. "Every event I go to-and that's why I don't like going to too many events-somebody is trying to sell me something," says Kozlowski.

And who can blame them? In the nine years since Kozlowski, 54, was named CEO of Tyco International, the Bermuda-headquartered conglomerate's sales have mushroomed to $38.5 billion from $3 billion. Much of that growth has been fueled by Tyco's endless appetite for acquisitions. Since 1992, the company has completed more than 400 such deals, earning Kozlowski headlines such as "Deal-a-month Dennis" and the "CEO on Steroids."

While Tyco's buying binge began before Kozlowski took control, it has evolved into a far more disciplined-and routine-activity under his watch. "It's just part of our ingrained culture," says Kozlowski, who shuns corporate bureaucracy and runs the company out of offices in Exeter, NH. "All of our senior operating people are geared toward looking for acquisition opportunities."

And despite his protestations about unsolicited pitches, Kozlowski, too, remains on the prowl, quietly but aggressively pursuing companies. "In some cases, you get a call back three years later from the CEO who says, 'yeah, I thought about it. I've done this long enough and I'm ready to do something else now,"' he says, noting that Tyco's 1998 acquisition of U.S. Surgical Corp. occurred after just such a delay. In another instance, Kozlowski found an entree to a deal through his daughter's friendship with a Middlebury College classmate. The classmate's father was a partner in a leveraged buyout firm that owned a hospital-supplies company Kozlowski wanted to buy. So he called the partner, and after four months of negotiations, Tyco acquired the Kendall Company.

Not every deal falls together so serendipitously. And the details of the acquisitions are, obviously, complex. But the qualities Tyco seeks in prospective partners are relatively straightforward: Target companies must add to earnings -- immediately. They must relate to one of Tyco's existing divisions, which include medical products, electronics, fire protection and security systems. (A notable exception: Tyco's $10 billion acquisition of CIT Group the nation's biggest independent finance company.) It helps, too, if the company is in the midst o rocky period, with layers of management or inefficient plants that are easily eliminated.

Once a deal is done, Tyco's systematic approach means layoffs and other cost-cutting measures are announced within a few weeks of the change in control. When Tyco acquired ADT Ltd., for instance, it quickly eliminated 1,000 of 8,000 jobs; at AMP, 8,000 of 48,000 workers were let go. Overseeing such layoffs, says Kozlowski, is "the crummiest part" of being a CEO. "But it's unfortunately a necessary part of the job," he adds, "because if you don't do it, your competition is going to."

Yet for all of Tyco's planning and analysis, Kozlowski is well aware that deals still go awry. For every one that's completed, he estimates, nine or so others collapse. In an effort to avoid buyer's remorse, Tyco M&A experts spend time both poring over financial records and learning a company's culture. "Some people are trying to pass a problem on to us," Kozlowski says, "and some people are simply looking for a good home for their company and employees."

When a deal does fall through, even one of a significant size, its not emotional," says the Tyco CEO. "You're better off not doing a deal than doing a deal you'll regret," he says. Conversely, he insists that completing a major acquisition -- more than 120 major ones have been announced under his watch-is strictly business, too. The thrill, in other words, is gone. "It's not as exciting as watching Bernie Williams hit a home run in Yankee Stadium," says Kozlowski, who enjoys flying helicopters and piloting his 130-foot, J-class racing sloop in his spare time. "I get much more excited watching our stock price go up than I do by a deal. That's the real report card-how we're doing for our shareholders."
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Title Annotation:L. Dennis Kozlowski of Tyco International Inc.
Publication:Chief Executive (U.S.)
Article Type:Brief Article
Geographic Code:1USA
Date:Aug 1, 2001
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