Graphic Controls Corp.'s new owner, speeding along on a buying binge that's seen it snap up nearly 100 companies in six years, has a reputation for slashing costs and running lean businesses.
Tyco International Ltd., which is based in Hamilton, Bermuda, but is managed from Exeter, N.H., has been one of the most aggressive buyers in corporate America during the 1990s. The company has shelled out more than $11 billion since July 1997 to buy a series of companies, mostly for its medical products business.
But under the leadership of L. Dennis Kozlowski, Tyco's chief executive officer, the company typically isn't content to sit back and let things ride at its new acquisitions. Tyco usually expects its acquisitions to add to its profits immediately and often moves quickly to cut costs and increase profit margins.
That's why Tyco is likely to push to eliminate similar product lines between Graphic Controls and its existing disposable medical products business and also try to increase the Buffalo company's profit margins, said Brian K. Langenberg, an analyst at CS First Boston.
Analysts said they expect the $460 million in cash deal for Graphic Controls, which was announced Tuesday, to add a penny or two to Tyco's per-share profits during the fiscal year that ends next September.
And while Tyco has been buying companies at a breakneck pace, it hasn't been taking a willy-nilly approach to its acquisitions.
Instead, Tyco has kept a sharp focus on buying companies that will help it become even more of a major player in its four main businesses: disposable medical supplies, fire protection and security systems, flow control products and electronic components.
Most of Tyco's recent acquisitions have been focused on the medical products and home security businesses, including its $1.77 billion deal in March to buy American Home Products Corp.'s medical supplies business and its $3.89 billion agreement in May to acquire U.S. Surgical Corp., where job cuts also are expected.
Tyco, which is unrelated to the toy company of the same name, also moved from being a small player in the security systems business to being one of the market leaders.
That occurred when the company rode in as a white knight to snap up security firm ADT Ltd., which was the target of a pair of bids from other suitors, for $7 billion last summer. Tyco then added to the security business by acquiring Borg-Warner Security Corp.'s electronic alarm unit for $425 million in April.
Tyco usually moves quickly to boost profits. For instance, Tyco reshuffled the management of ADT shortly after acquiring the security systems firm by slashing the number of vice presidents from 13 to six.
Two months after buying Sherwood-Davis & Geck from American Home Products Inc., Tyco announced plans to close the unit's St. Louis headquarters and consolidate its operations at its Kendall Co. unit in Massachusetts, eliminating about 420 jobs in downtown St. Louis.
Combining Sherwood with Kendall made Tyco the leader in the disposal medical products business -- a position that the Graphic Controls acquisition will only enhance.
Because of the $3.4 billion in acquisitions that Tyco has made between last September and the end of June, the company has set aside $371 million to pay for severance and the costs of shutting down and consolidating some of the facilities it acquired in the deals, according to a filing with the Securities and Exchange Commission.