Danaher demurs on M&A, looks to China, Brazil and Russia

Diversified conglomerate Danaher ($DHR) emphasized organic growth rather than acquisitions at a recent investor meeting. That's despite much speculation on its M&A appetite following the Medtronic ($MDT) announcement that it will acquire Covidien ($COV).

Danaher has been focused on small acquisitions, some in high growth countries like China, Brazil and Russia. The company had a compound annual revenue growth rate from 2010 through 2013 of more than 30%, greater than 10% and in excess of 25% in each of these countries, respectively, Last year, Danaher spent about $1 billion in 14 acquisitions, some in these high growth countries.

The company has 5 major business segments: life sciences and diagnostics, dental, industrial technologies, test and measurement, and environmental.

Danaher devoted its entire June 24 investor and analyst meeting to its dental unit. The dental unit accounted for only 11% of the $19.1 billion in Danaher revenues in 2013. Life sciences and diagnostics were 36%; test and measurement were 18%; and environmental was 17%.

Even though dental is one of Danaher's smaller segments by revenue, it's also one of the newer businesses. Danaher assembled its dental segment over the last decade through more than 24 acquisitions. It all began with the 2004 purchase of German dental company Kaltenbach & Voigt (KaVo) for $425 million.

Danaher SVP Henk van Duijnhoven pointed out 6 emerging markets that are key to driving growth for Danaher in the dental market: China, Brazil, Russia, Turkey, the Middle East and Mexico. He noted the company has added 300 employees in these regions in the last few years. Building up commercial muscle and creating more localized capabilities are the key opportunities abroad. Duijnhoven said Danaher will continue to deploy capital in these countries to build strong market positions.

In characterizing potential dental acquisitions Danaher EVP and CFO Daniel Comas said, "it's very fragmented and largely family held businesses, and that's a long cultivation cycle typically." He added, "We've got a really active funnel where we're actively talking to a number of groups and hopefully we'll be able to deploy some capital there, but the first and foremost thing is an organic play and we think we've got a lot of runway there."

- here is the webcast of the June 24 Danaher investor and analyst day meeting

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