By agreeing to pay $2.6 billion to acquire endovascular player ev3 Inc., Covidien Ltd. emphatically made two points. [See Deal] First, Covidien – now three years removed from its spin out of Tyco International Ltd. – is demonstrating a familiar pattern of growing through acquisitions, as it did under Tyco a decade ago. [See Deal] Second, Warburg Pincus and Vertical Group made a good call 10 years ago in backing the creation of ev3 to target vascular markets outside the coronary, at least in the eyes of one of the principals who started the company.
In building through buying, Covidien is working with a familiar playbook. As Tyco Healthcare Group, the company grew into a medical supply powerhouse through a string of sizable acquisitions, with each addition adding revenues and profits to the bottom line and new product lines that often shared little with the company's standing business. ( See "What Makes Tyco Run?" IN VIVO , March 1999 Also see "What Makes Tyco Run? " - In Vivo, 1 March, 1999..) But, after surviving the scandal and controversy that engrossed its parent Tyco for many years, Covidien is no longer driven by instantly accretive acquisitions that merely add numbers to the bottom line. ( See "Tyco Healthcare: Surviving Scandal," IN VIVO , April 2004 Also see "Tyco Healthcare: Surviving Scandal" - In Vivo, 1 April, 2004..) Instead, the company is evolving into a purer medical device company by developing products internally and, when the fit is right, acquiring companies that fit its broader strategy of moving into high-growth markets where it can be one or two in the list of competitors
