Is GE About To Stir Up The Medical Arena?

With the worst of the credit crunch over and plenty of cheap candidates, General Electric (NYSE:GE) may be about to become more active with acquisitions. With some oblique comments from a senior executive, it would seem that this American conglomerate is once again about to leverage its considerable capital resources. Investors may want to consider the sorts of companies that GE may be looking at as potential targets.

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Sticking to the Knitting

Although GE is a frequently-mentioned name in the guessing game of healthcare acquisitions, the company is actually rather focused and consistent with its healthcare business. GE is a significant presence in the imaging, diagnostics, life sciences and healthcare IT spaces. By and large, the company steers away from interventional products, so the likelihood that GE would buy a company like Stryker (NYSE:SYK) is quite low.

Cancer Therapy

Although GE is not active in interventional medicine, Varian (NYSE:VAR) might be a logical way for the company to make that transition. An argument could be made that Varian's radiation therapy systems would be a natural extension of GE's diagnostic imaging products. Along similar lines, TomoTherapy (Nasdaq:TOMO) or Accuray (Nasdaq:ARAY) could get some consideration, though TOMO may be too small and Accuray too novel.

Imaging and Diagnostics

If GE stays within its traditional wheelhouse, new technologies within imaging and diagnostics would be obvious candidates. Volcano (Nasdaq:VOLC) would expand GE's cardiac catheter lab suite, while Masimo (Nasdaq:MASI) would fit comfortably with the company's patient monitoring business. Either acquisition would be an asset to GE's ongoing efforts to compete against the likes of Covidien (NYSE:COV), Philips (NYSE:PHG) and Siemens (NYSE:SI), as well as a host of Japanese rivals.

Along similar lines, Hologic (Nasdaq:HOLX) could make sense, assuming GE were able to navigate the antitrust concerns and get comfortable with the idea of business models that include big contributions from consumables.

Life Sciences

GE already has an abiding interest in next-generation life sciences equipment and has reportedly been working on third-generation sequencing and proteomics technologies. If the company wanted to bulk up this segment, a company like Bruker (Nasdaq:BRKR) could make sense. By the same token, Agilent (NYSE:A), Thermo Fisher (NYSE:TMO) and Waters (NYSE:WAT) could all provide more scale for GE's life sciences business, though these three companies are more often seen as buyers than probable sellers.

The Bottom Line

Of course, there is no rule saying that GE could not go further outside the box and look at a target like Qiagen (Nasdaq:QGEN) or even Intuitive Surgical (Nasdaq:ISRG). Past behavior, though, suggests that a deal in the imaging/diagnostics or life sciences space would be much more within GE's comfort zone.

By the same token, GE may do absolutely nothing at all. For every deal that happens in the healthcare sector there are probably 50 unfounded rumors. What's more, it's not like GE doesn't have other opportunities in energy or defense to make acquisitions. For long-suffering healthcare investors, though, a little attention from sizable buyers would likely be welcome. Whether or not a particular company gets a bid, just knowing that buyers are on the prowl again often has a way of bulking up valuations across the sector. (For more, see Conglomerates: Cash Cows Or Corporate Chaos?)

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