40 years, 400 acquisitions, 1,800-fold returns – its stock performance has exceeded that of Berkshire Hathaway under Warren Buffett's leadership, with acquisition achievements comparable to Blackstone and KKR, and it has cultivated the legendary CEO Larry Culp who successfully rescued and reshaped General Electric. This is not a myth, but the impressive track record delivered by Danaher, globally recognized as the "King of Acquisitions" and "Lean Operations Benchmark."

What is Danaher's success formula? How did it grow from a small company that started with wrenches and industrial tools to become a superpower in the life sciences field? Why do leading domestic companies like Midea Group, Fosun Pharma, and WuXi Biologics all compete to learn from it?

"The Danaher Model," a book co-authored by Yang Yi and Chen Chaowei, former senior executives of Danaher China, provides the first in-depth analysis of Danaher's two core capabilities that underpin its success as the "King of Acquisitions": the Danaher Business System (DBS), hailed as "the world's leading lean operations system in the West," and its exceptional strategic acquisition and integration capabilities.

**What is Danaher?**

In February 2015, "The Grand Budapest Hotel," co-produced by Steven Rales and his long-time partner Wes Anderson, received nine Oscar nominations at the 87th Academy Awards, including Best Picture and Best Director, ultimately winning four awards including Best Original Score and Best Production Design.

Beyond being a film producer, Steven has an even more successful identity – he is the founder of Danaher Corporation, a NYSE-listed company whose market capitalization once exceeded $200 billion in 2024. He and his brother Mitchell Rales co-founded Danaher Corporation in 1984.

In February 2019, Danaher Corporation acquired General Electric's biopharmaceutical business for $21.4 billion, completing the largest acquisition in the group's 35-year history with a record-breaking amount. Coincidentally, this acquisition occurred less than five months after Larry Culp, former CEO of Danaher Corporation, was appointed as Chairman and CEO of General Electric.

Within the next 24 hours, domestic and international business media were overwhelmed by this explosive acquisition news. Everyone connected this news with the October 2018 event when "General Electric appointed Larry Culp, former CEO of Danaher Corporation, as the first externally recruited CEO in its 127-year history." Media outlets began asking: "Who is Danaher?"

Danaher Corporation, previously familiar only to MBA students, business elites, and investors, finally began to break its deliberately maintained low profile and mystery, gradually entering the Chinese public's business perspective.

Danaher Corporation is actually a globalized company with over 40 years of history, headquartered in Washington, D.C. Its Jewish founders, the Rales brothers, were fishing in a stream called Danaher in Montana and had a good catch, which led them to decide to rename their acquired real estate trust company DMG to Danaher. They probably didn't anticipate that this group would eventually have a market capitalization exceeding $200 billion and rank 118th in the 2022 Fortune 500.

Although Danaher Corporation deliberately maintains a low profile, it owns many famous brands and subsidiaries in various fields. For example, the Leica brand, known to everyone in photography circles, is actually owned by Leica Microsystems, a subsidiary of Danaher Corporation, and is licensed to the once-related Leica Camera. Pantone, the leading brand in fashion color management that releases the "Color of the Year" annually, became a wholly-owned subsidiary of Danaher Corporation in 2012.

During the COVID-19 pandemic, major domestic and international vaccine manufacturers including Pfizer, Johnson & Johnson, and Sinovac all procured purification equipment and fillers, sterilization filtration products, and single-use bioreactors from Danaher Corporation. These core products were provided by Cytiva and Pall under the Danaher Corporation umbrella.

More interestingly, Danaher Corporation is a constantly evolving enterprise. It evolved from real estate trust business, then entered the industrial sector through tires, rubber, and plastic products, successively involving gas station equipment, industrial control and automation, electronic measuring instruments, water quality analysis and treatment, dentistry, biotechnology, medical diagnostics, and life sciences – achieving tremendous success in each segment. Its business portfolio changes dramatically every 10 years, continuously spinning off and acquiring, until today, Danaher Corporation has become a commercial giant focused on healthcare with a market capitalization of $200 billion.

**Stock Performance Surpasses Berkshire Hathaway**

Danaher Corporation's stock performance has exceeded that of Berkshire Hathaway under Warren Buffett's leadership, making it one of the best-performing diversified groups in the United States over the past 40 years.

In 1985, Danaher Corporation under the Rales brothers proposed a hostile takeover offer of approximately $400 million for Scott Fetzer, located in Cleveland and selling encyclopedias and Kirby vacuum cleaners. Warren Buffett from Omaha, Nebraska, played the white knight role and ultimately acquired the company for $410 million.

Although the Rales brothers lost to Buffett in this acquisition case 39 years ago, their Danaher Corporation's stock performance subsequently defeated the investment-renowned Berkshire Hathaway over 5, 10, 15, and 30-year periods.

Danaher Corporation's 2019 annual report stated: "Since Danaher Corporation was born 35 years ago, we have delivered nearly 100,000% total shareholder return, while the S&P 500 index return during the same period was only slightly over 4,000%. In the past 5 years, our total shareholder return reached 144%, twice that of the S&P 500 index."

Calculating the 1984-2019 annual compound shareholder return rate, Danaher Corporation's annual compound total return rate was as high as 22%. This performance not only far exceeded other diversified groups like General Electric, Honeywell, and 3M, but also surpassed Berkshire Hathaway under Warren Buffett's leadership.

Since Danaher Corporation's restructuring and transformation in 1984, if we compare performance in 5-year cycles for the subsequent seven 5-year periods, Danaher Corporation is the only U.S. listed company that outperformed the S&P 500 index in all 5-year cycles. Over the past 40+ years, it has steadily outperformed the market for such an extended period, truly achieving "one of a kind."

**Acquisition Performance Rivals Blackstone and KKR**

Over 40+ years, Danaher Corporation has been one of the most successful companies worldwide in the acquisition field, even rivaling private equity giants Blackstone and KKR that focus on corporate acquisitions as their core business.

Danaher Corporation was born from the acquisition of real estate trust company DMG, and in the subsequent 40+ years, it completed nearly 400 acquisitions, spending approximately $90 billion. Combined with DBS-empowered superior operational capabilities, it created a market capitalization of approximately $200 billion and numerous listed and private companies spun off and sold by Danaher Corporation.

If we add Danaher Corporation together with these spun-off and sold companies like Fortive and Envista, the overall shareholder value created approaches $250 billion.

If we view Danaher Corporation as an acquisition private equity fund, its performance from establishment to the end of 2023 is approximately: annual average of 10 deals, with assets under management exceeding $80 billion when combining cumulative free cash flows and equity financing. Based on Danaher Corporation's shareholder returns, its net internal rate of return is approximately 21%.

Such investment results and management scale are fully comparable to world-class acquisition private equity funds like Blackstone, KKR, and Carlyle.

Acquisitions not only helped Danaher Corporation become larger but more importantly, become better. Through continuous entry into new markets and industries, Danaher Corporation successfully found its "second growth curve," and even third, fourth, and fifth growth curves. In contrast, many companies from the same period cannot achieve even one successful transformation or complete one successful acquisition integration. Danaher Corporation's performance is indeed enviable.

**DBS Management Output and Post-Investment Empowerment Rival McKinsey**

DBS surpasses top consulting firms like McKinsey and Bain in terms of ease of implementation and success in management output and post-investment empowerment for operating companies.

Unlike Warren Buffett's "light post-investment management" value investment philosophy, Danaher Corporation deeply intervenes in operational improvements of acquired companies through DBS, directly participating in the value creation process.

In 1986, Danaher Corporation began learning the Toyota Production System and gradually developed its own complete business management system. This continuously evolving management system has helped Danaher Corporation successfully integrate 400 acquired companies: average annual improvement of 50-75 basis points in group operating profit margins, free cash flow exceeding net profit for 30 consecutive years, and average annual double-digit growth in earnings per share.

Many companies achieved breakthrough management improvements through DBS implementation after being acquired by Danaher Corporation, driving significant performance improvements. For example, Cepheid, a molecular diagnostics company acquired by Danaher Corporation in 2016, saw its gross margin improve by over 10% and operating profit margin rise from nearly zero to over 30% five years after acquisition.

Such significant cases of improving corporate operational efficiency are not isolated incidents; the vast majority of companies acquired by Danaher Corporation achieve significant profit margin improvements.

DBS is not some profound and mysterious empty theory. On the contrary, Culp once used a golden phrase to describe DBS: "Common sense as the framework, thorough implementation as the method." When one person practices common sense on one thing for one day, it's an ordinary phenomenon, but when a large group with 70,000 employees globally and dozens of operating subsidiaries can have everyone from the chairman and CEO down to frontline sales representatives and factory operators learn, understand, and personally practice this common sense, DBS can unleash amazing power.

After hundreds of DBS-empowered integration practices, we can say Danaher Corporation is one of the most successful companies worldwide in management output and post-investment empowerment.

**CEO Cultivation Capabilities Rival P&G and IBM**

Danaher rivals IBM, Procter & Gamble, and General Electric as a CEO cradle. In 1990, founders the Rales brothers appointed professional manager George Sherman to lead the group, and Danaher Corporation has since changed CEOs three times, each transition being smooth and successful.

Besides "producing and using" its own CEOs, Danaher has also supplied many top leaders to other listed companies. Harvard Business Review published "The Surprising Companies That Produce the Best CEOs" in January 2020, pointing out that for a long time, companies like General Electric, IBM, Procter & Gamble, and McKinsey were the "military academies" for producing quality CEOs.

In stark contrast, General Electric's first externally recruited chairman and CEO in its history was Larry Culp, who had led Danaher Corporation for 13 years.

In research by the CEO Genome Project from renowned leadership consulting firm ghSMART, Medtronic, Rohm and Haas, and Danaher Corporation were proven to be typical representatives of the new generation of CEO factories, especially the latter two. Researchers analyzed 35 CEOs who had worked at Rohm and Haas and Danaher Corporation, finding that when these CEOs were in office, their companies' stock performance was 67% better than when other CEOs of the same companies were in charge.

Danaher Corporation executives, due to their excellent acquisition and integration management capabilities, are not only recruited by other companies as CEOs with high salaries but are also frequently poached by top private equity firms as operating partners or senior advisors.

In recent years, Chinese A-share listed companies have also begun appointing former Danaher Corporation executives to core management positions. For example, Wantai BioPharm appointed Ms. Jiang Zhiming, former general manager of Beckman Coulter China under Danaher, as company general manager in early 2024; Fuchun Technology appointed Ms. Zhang Xuan, former business director of Danaher China Life Sciences Platform, as general manager in December 2023.

**Danaher's Essence: Perpetual Acquisition Fund + Management Consulting Firm**

Before expanding the analysis, let's state the conclusion: Danaher Corporation's business essence is more like a combination of a perpetual acquisition fund and management consulting firm.

Why do we say this? Let's first analyze Danaher Corporation's business portfolio changes and key financial indicator changes over 40+ years to see what insights we can gain.

The analysis shows Danaher's entire business portfolio is constantly changing, with approximately 5%-10% change each year, and the entire business portfolio undergoes very significant changes every 10 years. By 2024, life sciences, biotechnology, and diagnostics businesses account for nearly 100% of Danaher Corporation's revenue.

From a business portfolio perspective, Danaher Corporation's development can be roughly divided into four stages based on main business composition:

1984-1990: Leveraged buyout holding company 1991-2003: Lean operations industrial company 2004-2015: Globally operating diversified group 2016-present: Healthcare-focused technology company

Danaher Corporation has systematically improved various operational financial indicators since 1990, with revenue growing from less than $1 billion in 1990 to approximately $31.5 billion in 2022, representing an annual compound revenue growth rate of about 12%. Gross margin improved by about 30% over 32 years, operating margin improved by about 20%, and net margin improved by about 20%.

This improvement comes from two parts. First is the improvement brought by business portfolio changes. Traditional industrial products have gross margins fluctuating in the 20%-30% range due to low industry barriers and intense competition. Later-entered niche industrial markets have gross margins of 40%-50% due to higher barriers and more relaxed competitive landscapes. The healthcare field that Danaher Corporation has mainly invested in over the past 15 years can achieve average gross margins of 60% or even higher due to higher technical requirements, regulatory barriers, and customer stickiness.

The second is naturally the magic brought by DBS. Almost all acquired businesses can typically unlock 3-5 percentage points of gross margin growth through 3-5 years of DBS integration by Danaher Corporation, while also experiencing declining management and administrative expense ratios, ultimately reflected as higher operating margins.

Danaher Corporation itself does not directly operate any business. Its group headquarters in Washington, D.C., mainly consists of top management, DBS office, legal, finance, tax, human resources, and acquisition teams. Combined with the business portfolio analysis above, we can view Danaher Corporation as a perpetual acquisition fund with extremely strong empowerment management capabilities.