The conventional wisdom on successful corporate acquisitions is short and simple: Make them small and make them synergistic. Yet companies that rely solely on this view risk missing an entire world of valuable strategic opportunities. A year-long research program has shown that companies can pursue a nonsynergistic strategy profitably. In fact, research has uncovered a diverse group of organizations, including Thermo Electron Corporation, Sara Lee Corporation, and Clayton, Dubilier & Rice, that have grown dramatically and captured sustained returns of 18 to 35 percent per year by making nonsynergistic acquisitions.

The successful acquirers fell into two groups: diversified public corporate acquirers and financial buyers such as leveraged buyout (LBO) firms. We chose to study LBO firms because, like the rest of the world, we were fascinated as we watched them outbid corporate buyers and then produce extraordinary returns without the benefit of synergies among their businesses. We compared the LBO firms' practices with those of successful diversified corporate acquirers and were surprised to find that their operating principles were remarkably similar.

Many corporate strategists refuse to believe that they can be successful in pursuing nonsynergistic deals

Yet many corporate strategists refuse to believe that they can be successful in...