3M's M&A Mania Continues With $810 Million Deal for Arizant
3M's deal-making reflects some nice positive trends for Corporate America. Because of restructurings and layoffs, companies have seen profits improve over the years. What's more, the cost of debt is at rock-bottom. Of course, the main problem is that it is tough to find growth. So, with lots of cash -- and the cost of capital at nearly zero -- the ideal strategy looks to be acquisitions.
3M's Latest Acquisitions
The deals for Cogent and Attenti have synergy as both companies provide security services. This is definitely a growth area -- with healthy double-digit rates -- which should continue for the long haul.
Cogent is a leader in biometric technologies, which provides access via thumb prints, eye scans and so on. Such approaches allow for increased security effectiveness, which is becoming more important in light of growing cyber threats and breaches.
All in all, the global biometric market is roughly $4 billion and the growth rate is greater than 20%. Not only do federal agencies need biometric technologies, but so do the thousands of state and local law enforcement agencies. And, with the help of 3M, there should also be new opportunities with corporate customers. Besides, the company already provides border management products, issuance systems for passports and visas, and verification products.
Attenti provides solutions for people-tracking, including those awaiting trial or on probation. Attenti's technology relies on a combination of GPS and radio-frequency technologies. And yes, 3M also has complementary solutions like file tracking, library management and so on.
While security is a key part of Attenti's business, the biggest opportunity may actually be health care (the company also helps to monitor patients).
And health care is the focus of Arizant, formerly owned by private equity firm Court Square Capital. The company develops products that eliminate hypothermia while a patient is in surgery. The infection-prevention business is large -- at about $1 billion -- and growing around 10% per year. For this year, Arizant expects to post roughly $200 million in revenues.
What's more, Arizant has a strong intellectual property portfolio, which is always interesting to 3M.
In terms of valuations and easy financing, the M&A market is certainly attractive. Besides, 3M has a global platform to leverage the products from Cogent, Attenti and Arizant. And the company is smart to target the security and health-care industries.
Despite all this, there are still risks. It's never easy to integrate technology operations -- especially those that are on the cutting-edge. And there will be additional strains because of the sudden increase in the number of deals. So for shareholders, caution is important and it may be a good idea to wait for several quarters to see how things play out.