Table: The Kozlowski Method

Tyco buys well over 100 companies a year, using what amounts to an in-house investment bank--six professionals who work with CEO Dennis Kozlowski on each deal. They move with blinding speed, typically taking six weeks, vs. a more standard six months, and follow a five-step process:

PROSPECTING

Each year, Tyco looks at more than 1,000 possible targets, ranging from small home-security firms to giants like CIT. The best ideas usually come from Tyco's operating managers.

FIRST PASS

Each potential acquisition is reviewed by the appropriate operating unit to determine if it would fit into Tyco's mix. Half of all targets are eliminated at this stage.

DUE DILIGENCE

Tyco signs a confidentiality agreement with the target; it never makes hostile bids. A team arrives to tear apart operations and books. Another 40% of candidates are cut.

NEGOTIATION

Every deal must immediately add to Tyco's earnings. If the price of the target company rises beyond that point, Tyco walks.

IMPLEMENTATION

As soon as terms are reached, Tyco's operating people swarm the new company to develop a turnaround plan. Their orders: to start executing the plan the day the deal closes.

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