Former Honeywell CEO Dave Cote Seeks M&A with Goldman Sachs

Dave Cote, who purchased 100 corporations and offered 70 whilst operating Honeywell Global Inc., says he is aware of what it takes to seek out the correct acquisition.

“Be ready to kiss 100 frogs,’’ he mentioned.

Now Goldman Sachs Team Inc. is tapping Cote’s enjoy from a decade and a part as Honeywell’s leader government officer for a brand new partnership aimed toward cobbling in combination an commercial operation from scratch. The particular acquisition corporate raised about $600 million in a June eight preliminary public providing, and Cote is eyeing offers that may most likely vary from $1 billion to up to $five billion.

“The sky’s the prohibit so far as I’m involved,’’ Cote mentioned in a phone interview ahead of the providing. “If we discover one thing just right and will assist it develop organically and inorganically, guy, that’d be nice.’’

Goldman is dedicating a group to scouting commercial objectives and Cote, 65, will practice his intuition for what works. The funding automobile, referred to as GS Acquisition Holdings Corp., can lift debt and much more fairness if wanted. Cote mentioned he’s putting in place his personal cash within the vary of “mid-single digit tens of millions.” As a part of the IPO, further finances can also be raised thru an choice through which underwriters can promote nine million extra percentage devices.

M&A Previous

At Honeywell, Cote snapped up corporations to construct out companies in protection apparatus, gasoline detection and bar-code scanning whilst exiting others reminiscent of auto portions. A flailing commercial corporate when Cote took over in 2002, Honeywell added about $90 billion of marketplace price whilst paying dividends of greater than $17 billion all through his tenure. Roger Fradin, who helped Cote in finding acquisitions at Honeywell, will sit down at the undertaking’s board. So will Jim Albaugh, who used to be CEO of Boeing Co.’s industrial aircraft unit.

Now is a superb time to seek for commercial objectives, Cote mentioned, as a result of corporations are seeing sturdy call for whilst traders have grown wary at the sector. Business corporations together with 3M Co., Illinois Device Works Inc. and Parker-Hannifin Corp. have dropped greater than 10% this 12 months.

The economic international is affected by corporations that experience came upon acquisitions, mentioned Deane Dray, an analyst at RBC Capital Markets. Basic Electrical Co.’s marketplace price has shriveled by way of $150 billion within the ultimate two years, partially on account of offers that went awry within the oil and power-generation industries.

“Now not many of us can do it neatly over an extended length,’’ Dray mentioned. “There’s an excessively small listing of commercial CEOs who the marketplace will say has been a hit. Dave Cote is considered one of them.’’

‘New Hampshire Affordable’

It didn’t get started out that means at Honeywell, mentioned Cote, who touts himself as “New Hampshire reasonable.’’ Buyers had been cautious of the corporate doing any offers after the inventory suffered on account of the unwieldy number of companies, together with a merger with Allied Sign that created warring cultures. Cote’s methodical and wary method to mergers and acquisitions in the end received over shareholders.

“At first, no traders sought after me pursuing M&A they usually simply concept I used to be going to blow the cash,’’ he mentioned. “Curiously, over the years they began giving me a difficult time for now not spending the cash rapid sufficient.’’

For the brand new undertaking, the best applicants might be family-owned companies through which maximum contributors wish to money out whilst others wish to keep on board to rev up expansion underneath Cote’s steering, he mentioned. A pleasant choice for shareholders might be a technique to compete with flush private-equity companies on the lookout for sole control keep watch over.

Skill Hunt

He’s additionally depending on discovering proficient executives inside the corporations he buys. His successor at Honeywell, Darius Adamczyk, used to be plucked out of a small maker of bar-code scanners that used to be bought for $720 million in 2008. Cote became excessive activity to Adamczyk ultimate 12 months and passed over the chairman’s place in April.

Cote desires to duplicate Honeywell’s technique of establishing “nice positions in just right industries.” That implies making a marketplace chief within the trade segments he objectives, and to supply merchandise that experience an edge on competition thru higher generation.

Deal Limits

There are some barriers. Cote has a non-compete settlement with Honeywell till 2023 through which he has to get written consent from his former employer for any trade this is in festival with the corporate. Cote declined to talk about how or if that might prohibit his acquisition objectives. He mentioned he desires to take a look at all commercial companies together with in aerospace and strong point chemical substances, the place Honeywell additionally has operations.

Cote’s largest acquisition try, a $90 billion overture to United Applied sciences Corp. in 2016, startled traders and briefly fell aside. In his newest undertaking, Cote might be that specialize in a lot smaller offers. He mentioned he’ll keep on with his conventional play e-book of doing the heavy lifting on figuring out the correct offers and being keen to stroll clear of them if the cost isn’t proper.

“I don’t need this asterisk put on the finish of my 16-year profession, pronouncing, ‘Right here’s the place he misplaced his marbles,’ ’’ he mentioned. “I would like it to be every other luck.’’

Line up the frogs.

By means of Thomas Black