The recent collapse in stock prices at some high-profile deal makers has led many executives to pull back from acquisitions. But consider the counterpoint offered by Cincinnati uniform-supplier Cintas. Since the 1960s, Cintas has supplemented its organic growth with a steady diet of small acquisitions. In the past five years alone, the company has spent $3 billion on more than 250 deals, which have accounted for 40% of its revenue growth. Cintas has boosted sales by 20% annually since 1986 to reach $2.3 billion in FY 2002, leapfrogging, along the way, to first place in its industry. In the same period, the company’s market cap has grown 23% per year to $8.5 billion. Shareholders have reaped the rewards of Cintas’s methodical acquisitions, receiving an average annual return of almost 21%—five percentage points more than the company’s cost of equity.
A version of this article appeared in the March 2003 issue of Harvard Business Review.