US Serial Acquirers: 6 of 16 Earn Above Cost of Capital
[Part of our Global Serial Acquirer Scorecard]
Key Finding: 6 of 16 US serial acquirers earn above a 12% cost of equity (38% Tier A rate). Zero companies earn below 5% — the only market in our scorecard with no Tier D. But the US also has the highest average goodwill intensity (43%) and the widest margin-ROIC disconnects: Roper Technologies earns 28.4% operating margins and 6.2% ROIC. The best US serial acquirer — Illinois Tool Works at 30.8% ROIC — achieved it by stopping acquisitions.
We screened 16 US serial acquirers for return on invested capital. Six earn above 12%. Two sit borderline at 10-12%. Eight earn between 5-10%. None earn below 5% — the only market in our scorecard with zero Tier D companies.
The US has the best operating margins of any market we screen (22.4% average) and the highest goodwill intensity (43% average GW/TA). Great margins plus expensive acquisitions produce the widest gap between operational quality and capital allocation outcomes of any market.
The Scorecard
| # | Company | Ticker | ROIC | GW/TA | (GW+Int)/TA | Op Margin | Drawdown | Tier | Verdict |
|---|---|---|---|---|---|---|---|---|---|
| 1 | Illinois Tool Works | ITW | 30.8% | 32% | 36% | 26.8% | -28.0% | A | Stopped acquiring. Best ROIC in all markets. |
| 2 | Dover | DOV | 28.7% | 39% | 52% | 15.6% | -35.6% | A* | Anomalous spike. Normalized ~13%. |
| 3 | Rollins | ROL | 23.9% | 41% | 60% | 19.4% | -26.7% | A | 20-30% ROIC for 20 years. GW/TA crossing 40%. |
| 4 | Veralto | VLTO | 18.7% | 42% | 50% | 23.3% | -24.7% | A | Danaher spinoff. 4 data points. Unproven. |
| 5 | Watsco | WSO | 15.1% | 10% | 15% | 9.9% | -41.6% | A | Lowest GW/TA. HVAC distribution + Carrier JVs. |
| 6 | Broadridge | BR | 14.2% | 42% | 57% | 17.3% | -36.7% | A | Improving from 9%. Itiviti deal elevated GW/TA. |
| 7 | Ametek | AME | 11.6% | 45% | 72% | 25.6% | -27.1% | B | 15 years of 10-12%. Stable but borderline. |
| 8 | TransDigm | TDG | 10.7% | 46% | 61% | 47.4% | -25.0% | B | 47% margins. ROIC improving from 4%. |
| 9 | IDEX | IEX | 9.5% | 48% | 67% | 21.0% | -34.6% | C | Was 15%. Mott acquisition inflated GW/TA. |
| 10 | Nordson | NDSN | 9.4% | 56% | 67% | 25.9% | -39.1% | C | Was 17%. Highest GW/TA in any screen (56%). |
| 11 | HEICO | HEI | 8.8% | 45% | 62% | 21.4% | -21.3% | C | Was 13%. Wencor doubled goodwill. |
| 12 | Service Corp Intl | SCI | 8.0% | 12% | 15% | 22.7% | -27.1% | C | Low GW/TA misleading (funeral rights off-book). |
| 13 | Tyler Technologies | TYL | 6.9% | 49% | 66% | 14.0% | -55.6% | C | Was 20%+. NIC deal destroyed it. |
| 14 | Roper Technologies | ROP | 6.2% | 62% | 91% | 28.4% | -45.8% | C | 28% margins, 6% ROIC. Widest gap in any market. |
| 15 | Fortive | FTV | 5.9% | 60% | 79% | 18.3% | -32.1% | C | Danaher castoff. Never earned CoC independently. |
| 16 | Danaher | DHR | 5.6% | 52% | 76% | 20.4% | -39.8% | C | The pioneer. Post-spinoffs, ROIC has collapsed. |
Tier A (ROIC > 12%): 6 companies (38%). Tier B (ROIC 10-12%): 2 companies (13%). Tier C (ROIC 5-10%): 8 companies (50%). Tier D (ROIC < 5%): 0 companies (0%).
No Tier D. Even the worst US serial acquirers earn 5%+. The US industrial ecosystem supports higher base-level returns than Europe. Dover’s 28.7% ROIC is anomalous — likely a divestiture gain. Prior years ran 12.5%, 13.7%, and 16.0%. Normalized ROIC is approximately 13%.
ITW: The Best Serial Acquirer Stopped Acquiring
Illinois Tool Works has the highest ROIC of any serial acquirer in any market we screen. It achieved 30.8% by doing the opposite of what serial acquirers do.
| Period | ROIC | GW/TA |
|---|---|---|
| 2007 | 17.1% | 35% |
| 2012 (shift) | 19.4% | 32% |
| 2018 | 23.4% | 32% |
| 2025 | 30.8% | 32% |
ITW stopped aggressive M&A around 2012 and shifted to organic growth via its “80/20 front-to-back” process — focusing on the 20% of products and customers that drive 80% of profitability. GW/TA has been flat at 32% for over a decade. ROIC nearly doubled. The goodwill base stopped growing; the earnings on that base kept compounding.
At 26.8% operating margins on a clean balance sheet, ITW proves that the serial acquirer model’s greatest risk is the model itself. When you stop adding goodwill to the denominator, ROIC takes care of itself. Compare to Switzerland, where organic compounders like Schindler and Geberit earn 15-20% ROIC through the same approach — pricing power and market position over deal flow.
The Danaher Tree
Danaher pioneered the serial acquirer model in the US. The Danaher Business System — lean manufacturing applied to acquired companies — became the playbook every industrial acquirer referenced. Then Danaher started spinning off its own divisions, and the results tell the story.
| Entity | Status | ROIC | GW/TA |
|---|---|---|---|
| VLTO | Spinoff (2023) | 18.7% | 42% |
| FTV | Spinoff (2016) | 5.9% | 60% |
| DHR | Parent (remaining) | 5.6% | 52% |
Veralto (VLTO) — The 2023 spinoff with water quality and product ID businesses. 18.7% ROIC, 42% GW/TA, 23.3% operating margins. Only 4 data points post-spinoff. The best unit got spun out first.
Fortive (FTV) — The 2016 spinoff with industrial technology assets. 5.9% ROIC, 60% GW/TA, 18.3% operating margins. Mid-quality assets that never earned cost of capital independently.
Danaher (DHR) — What remains: life sciences in the most competitive segment. 5.6% ROIC, 52% GW/TA, 20.4% operating margins. The pioneer of the serial acquirer model earns below cost of capital.
Danaher spun off its best businesses first. What remains has massive goodwill and sub-CoC returns. The Danaher Business System is a process, not magic — it works on water treatment, not on pharma.
The Margin-ROIC Paradox
The US screen has the widest margin-ROIC disconnects of any market. Four companies earn 25%+ operating margins and sub-12% ROIC.
| Company | Op Margin | ROIC | GW/TA | (GW+Int)/TA |
|---|---|---|---|---|
| TDG | 47.4% | 10.7% | 46% | 61% |
| ROP | 28.4% | 6.2% | 62% | 91% |
| NDSN | 25.9% | 9.4% | 56% | 67% |
| AME | 25.6% | 11.6% | 45% | 72% |
When margins are 25%+ but ROIC is sub-12%, the acquirer paid too much per deal. The goodwill in the denominator absorbs the margin advantage. TransDigm has 47.4% operating margins — the highest in any market we screen — and earns 10.7% ROIC because it paid aggressively for aerospace monopoly positions. Roper Technologies earns 28.4% margins on niche software businesses acquired at 15-20x EBIT. Those multiples produce a 62% GW/TA and 91% (GW+Int)/TA — only 9% of Roper’s assets are tangible. The result: the widest margin-ROIC gap in any market.
This paradox doesn’t exist in Sweden, where operating margins average 8.8%. Swedish acquirers fail because they don’t have the margins. US acquirers fail because they overpay despite having the margins.
What Works: The Six Above Cost of Capital
Rollins (ROL) — 23.9% ROIC, 41% GW/TA, 60% (GW+Int)/TA, 19.4% operating margins. Pest control services. 20-30% ROIC sustained for 20 years despite GW/TA crossing 40%. Recurring revenue, local monopoly dynamics, and high switching costs explain the durability. Down 26.7%.
Veralto (VLTO) — 18.7% ROIC, 42% GW/TA, 50% (GW+Int)/TA, 23.3% operating margins. Danaher spinoff with the best assets. Only 4 data points. Unproven through a full cycle. Down 24.7%.
Watsco (WSO) — 15.1% ROIC, 10% GW/TA, 15% (GW+Int)/TA, 9.9% operating margins. The lowest goodwill intensity in the US group. HVAC distribution with Carrier joint ventures. Watsco earns its returns organically — 9.9% margins are modest, but 10% GW/TA means almost no goodwill drag. Down 41.6%. The US equivalent of Sweden’s OEM International: capital discipline through acquisition restraint.
Broadridge (BR) — 14.2% ROIC, 42% GW/TA, 57% (GW+Int)/TA, 17.3% operating margins. Improving from 9% ROIC — the Itiviti deal elevated GW/TA but the integration appears to be working. Down 36.7%.
The Borderline: Ametek and TransDigm
Ametek (AME) — 11.6% ROIC, 45% GW/TA, 72% (GW+Int)/TA, 25.6% operating margins. Fifteen years of 10-12% ROIC — stable but never above cost of capital. The 72% combined intangible ratio is the second-highest in the group behind Roper. Great margins, too much goodwill. Down 27.1%.
TransDigm (TDG) — 10.7% ROIC, 46% GW/TA, 61% (GW+Int)/TA, 47.4% operating margins. The most extreme margin-ROIC disconnect: 47% margins should produce 20%+ ROIC in any normal business. But TransDigm paid aggressively for aerospace monopoly positions, and the goodwill load absorbs the margin advantage. ROIC is improving from 4%, which is the right direction. Down 25.0%.
What Fails: Eight Below Cost of Capital
All eight Tier C companies share the same disease: excellent operating margins destroyed by acquisition premiums. Average operating margin for the eight: 21.5%. Average GW/TA: 48.0%.
The Goodwill Cliff
Twelve US serial acquirers carry GW/TA above 40%. Nine earn below cost of capital.
| Company (GW/TA) | ROIC | Above CoC? |
|---|---|---|
| ROP (62%) | 6.2% | No |
| FTV (60%) | 5.9% | No |
| NDSN (56%) | 9.4% | No |
| DHR (52%) | 5.6% | No |
| TYL (49%) | 6.9% | No |
| IEX (48%) | 9.5% | No |
| TDG (46%) | 10.7% | No |
| AME (45%) | 11.6% | No |
| HEI (45%) | 8.8% | No |
| BR (42%) | 14.2% | Yes |
| VLTO (42%) | 18.7% | Yes |
| ROL (41%) | 23.9% | Yes |
9 of 12 earn below cost of capital. The 40% GW/TA cliff holds globally. The three exceptions — Broadridge, Veralto, and Rollins — survive on either exceptional margins, asset-light business models, or both.
The One-Deal Destroyers
| Company | Pre-Deal ROIC | Post-Deal ROIC | Deal | GW/TA Change |
|---|---|---|---|---|
| TYL | 20% | 4.5% | NIC ($2.3B, 2021) | 25% to 49% |
| HEI | 13% | 8.8% | Wencor ($2B, 2023) | 35% to 45% |
| IEX | 15% | 9.5% | Mott (2024) | 41% to 48% |
Tyler Technologies (TYL) — From 20%+ ROIC to 6.9%. The NIC acquisition ($2.3B, 2021) nearly doubled GW/TA from 25% to 49% and destroyed the return profile. Government software. Down 55.6% — the worst drawdown in the US group.
HEICO (HEI) — From 13% to 8.8%. The Wencor deal ($2B, 2023) pushed GW/TA from 35% to 45%. Aerospace aftermarket parts. Still earning adequately on 21.4% margins, but below cost of capital. Down 21.3%.
IDEX (IEX) — From 15% to 9.5%. The Mott acquisition pushed GW/TA from 41% to 48%. At 21.0% margins, IDEX has the quality to recover if it pauses acquisitions. Down 34.6%.
The Rest
Nordson (NDSN) — 9.4% ROIC, 56% GW/TA, 25.9% margins. The highest GW/TA in any screen across all 14 markets. Was 17% ROIC. Precision dispensing. Down 39.1%.
Service Corp International (SCI) — 8.0% ROIC, 12% GW/TA, 22.7% margins. The low 12% GW/TA is misleading — funeral home rights and cemetery properties are classified as other intangibles, not goodwill. The 15% (GW+Int)/TA still understates true asset intensity. Down 27.1%.
The Standout: Illinois Tool Works
Illinois Tool Works at 30.8% ROIC is the best serial acquirer in any market we screen — and it achieved this by not being one anymore. GW/TA has been flat at 32% since 2012. ROIC nearly doubled from 17.1% to 30.8% over the same period. Operating margins of 26.8% on a stable goodwill base compound because the denominator stops growing.
Every other Tier A name in the US carries 39-42% GW/TA (excluding WSO). ITW’s advantage is the same as Sweden’s OEM International: the refusal to add goodwill to the denominator. The difference is that ITW was once an aggressive acquirer and chose to stop. That choice is worth 15+ points of ROIC.
The Cautionary Tale: Roper Technologies
Roper Technologies has 28.4% operating margins — best in the Tier C group, better than most Tier A names. ROIC of 6.2%. The gap between operating quality and capital returns is the widest in any market we screen.
Roper acquires niche application software businesses at 15-20x EBIT. At those multiples, 62% GW/TA and 91% (GW+Int)/TA are the result — only 9% of Roper’s total assets are tangible. The businesses perform. The allocation doesn’t. This is the same disease as Sweden’s Vitec Software (20.9% margins, 6.3% ROIC, 88% (GW+Int)/TA) — operational excellence destroyed by acquisition pricing.
At -45.8% drawdown, the market has delivered its verdict. But the underlying businesses are excellent. If Roper paused acquisitions and let earnings compound on the existing base — the ITW playbook — ROIC would recover.
Cross-Market Context
The US has a 38% Tier A rate and zero Tier D — the only market in our scorecard where every company earns above 5% ROIC.
| Metric | US (16) | Switzerland (13) | Japan (16) | Sweden (24) | UK (11) | Germany (10) |
|---|---|---|---|---|---|---|
| Above 12% ROIC | 6 (38%) | 8 (62%) | 8 (50%) | 6 (25%) | 2 (18%) | 3 (30%) |
| Below 5% ROIC | 0 (0%) | 1 (8%) | 2 (13%) | 9 (38%) | 3 (27%) | 6 (60%) |
| Avg GW/TA | 43% | 17% | 11.5% | 34% | 28% | 27% |
| Avg Op Margin | 22.4% | 15.5% | 19.1% | 8.8% | 12.3% | 10.2% |
| Worst drawdown | -55.6% TYL | -69.5% SIGN | -87.2% M3 | -61.8% VIT-B | -50.2% JDG | -63.3% BKHT |
US acquirers pay more per deal (highest avg GW/TA) but underlying businesses generate higher margins — so more survive the goodwill burden. Canada has the opposite problem: the lowest average margins and the highest Tier D rate after Germany. The 22.4% average operating margin is double Sweden’s 8.8% and nearly double the UK’s 12.3%.
Compare to Switzerland, where 62% of serial acquirers earn above cost of capital through organic growth and low goodwill intensity. The US and Swiss models represent two paths to high returns: the US through margin power despite high goodwill, Switzerland through goodwill discipline despite lower margins.
Where the Market Is Wrong
Watsco (WSO, -41.6%) — 15.1% ROIC, 10% GW/TA, steady HVAC distribution. A 42% drawdown for a consistent earner with the lowest goodwill intensity in the group. The business hasn’t deteriorated.
TransDigm (TDG, -25.0%) — 10.7% ROIC, improving from 4%. 47.4% operating margins provide the widest margin of safety in the group. If ROIC continues improving, TransDigm crosses into Tier A with the highest margins in any market we screen.
Dover (DOV, -35.6%) — Normalized ROIC of approximately 13% (prior years: 12.5%, 13.7%, 16.0%). The 28.7% latest-year figure is anomalous, but even at 13%, Dover earns above cost of capital on 39% GW/TA. Divestiture-driven simplification could sustain higher returns.
What to Look For in US Serial Acquirers
Four filters for this market:
- Watch the margin-ROIC gap. High operating margins don’t guarantee high ROIC. If margins are 25%+ and ROIC is sub-12%, the company is overpaying per deal. The goodwill in the denominator absorbs the margin advantage.
- One-deal risk. Tyler lost 13 points, IDEX lost 5.5 points, and HEICO lost 4 points of ROIC from a single large acquisition each. Monitor deal size relative to existing capital base.
- The ITW test. Would ROIC improve if the company stopped acquiring? If yes, the model is destroying value — the company would be worth more as an organic grower.
- Danaher spinoff watch. When serial acquirers start spinning off divisions, the best assets leave first. What remains carries the goodwill load of the acquisitions that funded the spinoffs.
Methodology
We screened 16 US serial acquirers listed on the NYSE and NASDAQ. All financial data in USD.
ROIC = NOPAT / Invested Capital (equity + debt - cash). Sourced from QuickFS (latest fiscal year). ROIC includes goodwill in the denominator.
GW/TA = Goodwill / Total Assets. (GW+Int)/TA = (Goodwill + Intangible Assets) / Total Assets.
Drawdown = Maximum decline from 5-year peak. Sourced from Yahoo Finance.
Tier classification: A (>12%), B (10-12%), C (5-10%), D (<5%).
Caveats: Dover’s 28.7% ROIC is anomalous (likely divestiture gains); normalized at ~13% based on prior 3-year trend. Veralto has only 4 data points post-spinoff (Sep 2023); classification is provisional. TransDigm and Rollins have negative book equity from leveraged recaps; ROIC calculation uses invested capital including goodwill. Service Corp International’s 12% GW/TA understates true asset intensity — funeral home rights and cemetery properties are classified as other intangibles.
All data as of February 2026.