Thomas P. Joyce, Jr., President and CEO
Daniel L. Comas, Exec. VP and Chief Financial Officer
William H. King, IV, Sr. VP, Strategic Development
Daniel Raskas, Sr. VP, Corporate Development
NUMBER OF EMPLOYEES: 81,000 (total)
GLOBAL HEADQUARTERS: Washington, D.C.
Danaher has a long history of growth through acquisitions. In fact, the company has made over 400 purchases since 1984 to enhance its offerings within its identified key focus business sectors. More recent buys that impacted its medical technologies footprint included Beckman Coulter Inc., a medical diagnostics manufacturer, for $5.87 billion in 2011, and Nobel Biocare Services AG, a then-leading provider of dental implants, for $2.2 billion in 2014. Both moves immediately positioned Danaher as a leader in these respective healthcare technology sectors.
Following in the footsteps of those acquisitions, Danaher made one of its largest purchases in 2015. In May, it was announced that the company had agreed to buy Pall Corporation, a global provider of filtration, separation, and purification solutions for an array of industries, including many to which Danaher was already providing products. The purchase price for Pall was $13.8 billion; the company saw revenues in 2014 of $2.8 billion—$1.5 billion from the life sciences segment and $1.3 billion from industrial. While the life sciences sector of Pall primarily sold into the biopharmaceutical market, it also supplied medical device manufacturers. Given Danaher’s strength in the diagnostics technologies sector, synergies between the two must have been apparent.
“Pall is a highly attractive business, with approximately 75 percent recurring revenues, mid-single digit organic growth, and a solid margin profile. Its best-in-class technology, combined with the broadest, most technically advanced solutions, make it the premier brand in the filtration industry,” Thomas P. Joyce Jr., Danaher’s president and CEO said in a press release that initially announced the acquisition. “Pall will provide us a leading business with significant runway for expansion and strengthens our life sciences position in the strategically attractive, high-growth biopharmaceutical market. With the Danaher Business System as a foundation, Pall associates will have the tools to accelerate new product development and improve operational efficiency in the years to come. We look forward to welcoming the Pall team to Danaher.”
In addition to the Pall purchase, Danaher acquired 11 other companies to further its capabilities across its five main business segments. In total, the company’s 2015 M&A activity significantly outpaced 2014’s moves (financially), which totaled more than $3 billion and 17 businesses, including Nobel Biocare. Company executives insist that its acquisition strategy will remain in place through 2016, but as of yet, there haven’t been any significant buys by Danaher since the Pall purchase. This may be due to the company’s strategy to split Danaher into two unique business entities—a science and technology focused growth company, and a diversified industrial firm.
Danaher and Fortive
In contrast to the consolidation trend among medical device OEMs that have firms growing rapidly while becoming a “one-stop-shop” to address a particular therapy application such as diabetes or orthopedics, this year’s Top 30 list features a number of examples of companies that are splitting into separate business entities. In several instances, where a company maintains dissimilar divisions that serve very different market segments, the company is going through a significant transformation to become two stand-alone entities. Danaher is yet another example of this trend.
In what must have been the biggest news cycle for the company in its history, on the same day the Pall acquisition announcement was made, Danaher also made it known that it would separate to become two independent, publicly traded firms.
Danaher would continue on to be the company name for the firm that executives described as “a science and technology growth company united by common business model characteristics, including significant recurring revenue and an attractive margin profile.” This entity would be made up of the Pall Corporation, along with the existing segments of life sciences and diagnostics, as well as dental. Rounding out this business would be the water quality and product identification platforms. The collective businesses posted approximately $16.5 billion in revenues in fiscal 2014.
The then-unnamed spin-off firm (since launched under the name Fortive) would be made up of Danaher’s industrial divisions, providing offerings that address needs in test and measurement, retail fueling, telematics, and automation. These business units saw revenues of approximately $6 billion in fiscal 2014.
“This is an exciting day for Danaher and an important step in our company’s history. Danaher has always been at its best when all platforms have the ability to invest in the highest impact organic growth opportunities, pursue meaningful acquisitions, and use the Danaher Business System to continuously improve performance,” Joyce said in the release that officially announced the split. “The pending strategic acquisition of Pall Corporation offers us the unique opportunity to drive greater shareholder value going forward as two stronger and better companies. Each company will be more focused with access to the capital necessary to pursue organic and inorganic growth opportunities. DBS will remain the foundation of both companies, allowing each to further strengthen their market leading positions while continuously improving growth, margins and cash flow.”
Leading Danaher will continue to be Joyce as president and CEO and Daniel L. Comas, executive vice president and chief financial officer. At the helm of Fortis is President and CEO James A. Lico, formerly the executive vice president of the Danaher Test & Measurement and Gilbarco Veeder-Root businesses.
“I am honored and humbled that the board has selected me to lead this new diversified industrial growth company,” Lico said in the announcement release. “As a standalone company, we will have the opportunity to pursue a more focused growth strategy with a renewed emphasis on M&A for many of these businesses. We have an outstanding team that will ensure this separation goes smoothly and that the company will continue to win in the markets in which we compete. I am committed to building and reinforcing the DBS culture and ensuring the company exceeds our customers, shareholders, and associates’ expectations.”
Regardless of the roller coaster ride that was 2015 for Danaher, with the start of a company split coupled with bringing a substantial acquisition into the fold (not to mention the incorporation of the other 11 company buys that were also brought aboard), numbers looked good for the business. Sales in 2015 (year ended Dec. 31) for medical device related businesses (life sciences & diagnostics, and dental) were $10.95 billion. This represented a 16.8 percent increase over 2014’s total for the same segments, which was $9.37 billion.
Broken out separately, the life sciences & diagnostics sector was credited with sales of $8.21 billion, a 14.3 percent increase over the $7.19 billion reported in 2014. According to Danaher, this business sector offers analytical instruments, reagents, consumables, software, and services that hospitals, physicians’ offices, reference laboratories, and other critical care settings use to diagnose disease and make treatment decisions. It also includes the filtration products and capabilities of the acquired Pall Corporation. Part of the increase in sales was attributed to price increases. Strong demand in China and other high-growth regions for urinalysis and immunoassay consumable products was another contributor. Another factor behind the increase was consumable sales to support an installed base of blood gas instruments, primarily in China and the Middle East.
The dental segment, which provides products used to diagnose, treat, and prevent disease and ailments of the teeth, gums, and supporting bone, as well as to improve the aesthetics of the human smile, saw even more dramatic growth. Sales in 2015 were $2.73 billion, a 25 percent increase over 2014’s $2.19 billion revenue. Again, a small portion of the increase can be attributed to price increases. The Nobel Biocare purchase in December 2014 had the greatest impact on sales, increasing the company’s overall dental line and providing new and complementary products and services.