What GE's Latest Deal Means for Investors
General Electric's (NYSE: GE) announcement last week that it would buy advanced surgical visualization company BK Medical for $1.45 billion in cash would almost have been an afterthought for GE a decade ago. However, these days it's a lot more critical. The deal marks the largest acquisition by CEO Larry Culp, a leader noted for his ability to acquire businesses, and it should give investors confidence in the company's future. Here's why.
First, the deal will boost growth. BK Medical produces imaging and surgical navigation technology used in surgeries and ultrasound urology. As such, it's highly complementary to GE's ultrasound business. That's important because ultrasound is one of the higher-growth businesses at GE Healthcare. For example, management has outlined mid-single-digit growth aspirations for its ultrasound business, compared to low- to mid-single-digit growth for the overall healthcare business.
In addition, GE Healthcare is probably the industrial business that would be the most highly rated if it traded as an independent company. For example, GE's closest competitor Germany's Siemens Healthineers, trades on higher estimated (Wall Street analyst consensus) enterprise value (market cap plus net debt) to earnings before interest, taxation, depreciation, and amortization, or EBITDA.
Source Fool.com
