ADT 1999 Annual Report Download - page 21

In health care, for example, we face cost pressures,
not to mention challenges from world-class com-
petitors. In security monitoring, we recognize that
our rapid growth requires us to increase the focus
on customer service. We have to keep our eye on
the ball at all times.
Although we have successfully integrated
our major acquisitions, we never assume such suc-
cess will automatically be ours. Indeed, we know
the corporate landscape is littered with failed mar-
riages, that the hope of wondrous synergies is often
a mirage. Therefore, we spend hundreds of hours
assessing the benefits and risks of each transaction
we consider. We always ask: What’s the worst-case
scenario?
We perform thorough due diligence every
time, and we walk away from nine out of every ten
transactions we evaluate. Even when we decide
that the rewards significantly outweigh the risks, we
spend a great deal of time planning the
integration process to minimize the difficulties
inherent in each acquisition.
Although we have done well thus far,
complacency just never seems to be an option.
There are new challenges every single day.
We are proud of many achievements in fis-
cal 1999, but a few stand out.
*Our organic growth was very strong, with
companywide revenue gains in double digits.
*We became the world's largest maker of
electrical connectors through our merger with AMP
Incorporated for $11.3 billion. Then, we
enhanced this leadership position in electronics by
purchasing Raychem Corporation and Siemens
Electromechanical Components.
*We became the first supplier of undersea
fiber optic telecommunications cable to make an
equity investment in a customer when we acquired
a stake in Worldwide Fiber.
*Through organic growth and acquisitions,
we enjoyed powerful gains in our security business.
In the United States, ADT Security acquired
Entergy Security and Alarmguard Holdings, Incorpo-
rated, two highly-ranked companies in the industry.
*We expanded our e-commerce operations.
Tyco Healthcare now does much of its purchasing
online and our ADT LION Web site offers interac-
tive, electronic automobile auctions. In October,
ADT Security launched an e-commerce site
allowing customers to design and buy an electronic
security system online.
Although our larger acquisitions tend to
grab the headlines, we also build our business in
much smaller ways, brick
by brick. Every day at Tyco,
behind the scenes, we are
committed to reducing
costs, creating sources of
recurring revenue and com-
pleting the small, add-on
acquisitions that help make
us a better company.
But you have to
pick your spots, and that's
why we divested certain
businesses last year. We sold the Mueller Company,
which makes hydrants and valves, because we
believe its revenues are more affected by economic
cycles than are our other businesses. We sold
Grinnell's Supply Sales division, a manufacturer and
distributor of industrial fittings, because it focuses
largely on commodity products with less appealing
growth rates and lower margins.
The funds generated by these divestitures
have been reinvested in other parts of our busi-
nesses that we believe will deliver greater returns to
our investors.
New Initiatives
We made our first equity investment in an undersea
fiber optic telecommunications system for several
reasons. As you would expect, we anticipate a
healthy return on our investment. Additionally, such
investments should help stimulate growth by creat-
ing a strong partnership between us and our cus-
tomers. Demand remains overwhelming, and the
capacity of many systems is sold out before they
become operational. We expect to announce addi-
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