Honeywell eyeing active M&A pipeline; 'a lot of good stuff out there'
Honeywell (NYSE:HON) sees a target-rich M&A environment and could be open to a large deal, management said Friday.
During the Q&A session of the 4Q13 earnings call, CEO Dave Cote was asked for color on the acquisition pipeline.
"There's still a lot of opportunity for us when it comes to M&A," he replied. "It's a big world out there and we look at the possibilities for great positions and good industries building off the portfolio we have. There's still a lot of good stuff out there."
Cote noted that deals sometimes came in bunches and timing was hard to predict, and he stressed the importance of being smart and opportunistic.
CFO Dave Anderson followed up on Cote's comments, describing the pipeline as "rich."
"There's always the distance between the cup and the lip in M&A," Anderson said. "It's very tough to move from concept to actually close. But what we've done has been very successful."
The CFO noted previous buys and indicated that related deals were possible in the future.
"You go back to 2005, the Novar transaction, the UOP transaction; go forward in terms of what we've done in terms of building out a position in gas detection, our safety products business, the growth now in AIDC [automatic identification and data capture] scanning and mobility," Anderson said. "These are all very, very smart adds that lend themselves to further both organic and inorganic growth; the Thomas Russell add to UOP."
Big buy?
Near the end of Friday's conference call, CEO Cote was asked if he would prefer to do a larger deal if one came along, or if smaller bolt-ons were the main focus. In reply, he said he would rather do ten USD 200m "really good deals" than one 2bn average deal.
"By the same token, if there is a USD 2bn really good deal, I'm certainly not going to sit here going 'well, that's too big, I don't want to do that.' So it's going to be on a case-by-case basis," Cote concluded.
Management's comments on Friday were broadly consistent with those in previous months. At an investment conference in November 2013, as this news service reported at the time, President of Energy, Safety and Security Alex Ismail said the company would look at expanding into new adjacencies and intelligent building controls via acquisitions, with a focus on "smart add-ons" to the portfolio.
In his opening remarks on Friday's call, CEO Cote highlighted two business areas in a non-M&A context that he said were setting up Honeywell for a multi-year cycle of outperformance: the company's Wi-Fi Smart Thermostat, and its cloud-based voice controlled solutions.
Honeywell’s operating business units are Aerospace, Automation and Control Solutions, Performance Materials and Technologies, and Transportation Systems.
The company has separately used Deutsche Bank and Rothschild for larger buys since 2011, although financial advisory is often handled in-house. Bingham McCutchen and O’Melveny & Myers have been retained on several acquisitions in the past few years, according to the Mergermarket M&A database.