3M’s CEO Hints at More Big Acquisitions Despite Difficult Year

(Bloomberg) -- 3M Co.’s top executive isn’t shying away from big acquisitions, even as the company struggles through one of the more challenging years in recent history.

The maker of Post-it notes and touchscreen displays is prioritizing deals that capitalize on 3M’s existing strengths, Chief Executive Officer Mike Roman told Bloomberg TV in a wide-ranging interview. He pointed to the $4.4 billion purchase of bandage-maker Acelity Inc. this year -- 3M’s largest ever -- as the type of deal he likes.

“We do see an opportunity in our portfolio to make acquisitions,” he said. While investment in research and development remains the first priority for capital allocation, “we’ve been stepping up into a little bigger acquisitions.”

Roman is plotting a path forward for the St. Paul, Minnesota-based manufacturer as it struggles with a slowdown in the automotive market, headwinds in China and a volatile trade environment. He has already been forced to cut earnings expectations multiple times since taking the helm last year.

The shares fell 11% this year through Dec. 13, while the S&P 500 Index climbed 26%.

Economic Cycles

The CEO observed that market conditions “declined more rapidly” than expected at the start of the year. As a supplier to many industries all over the world, 3M is typically one of the first companies to get hit by an economic downturn.

“We’ve led into slowdowns -- in 2008 and ‘09, the oil and gas slowdown -- we saw those early and we know how to adjust,” he said. This time, 3M has seen early warning signs in China, as well as the automotive and electronics sectors, he noted. “When those markets recover, we will lead out.”

It takes the company about 90 days to adapt to a downturn, Roman said, and the company has already had layoffs and organizational restructuring this year. Roman admits that his leadership has been in the spotlight as the company struggled early in his tenure, but he believes 3M is well-positioned going into 2020.

To capitalize on a possible rebound, the manufacturer is investing in R&D and considering ways to reshape its portfolio. Besides the Acelity acquisition, the company last week announced the sale of its drug delivery systems business for about $650 million.

“We think about which parts don’t leverage the synergies so well anymore and we have made divestitures where it makes sense,” Roman said. “That portfolio priority is very important for me. How I think about leading change in the company is managing our portfolio.”

To contact the reporters on this story: Richard Clough in New York at rclough9@bloomberg.net;Caroline Hyde in London at chyde3@bloomberg.net

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Susan Warren, Tony Robinson

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