Honeywell International Inc. has more cash than almost every one of its peers and is about to start using it.

The $80 billion maker of industrial products including refrigerants and thermostats is warming to big acquisitions after largely sitting out last year’s surge in deals. Two years ago, Chief Executive Officer Dave Cote wasn’t keen on doing anything larger than $1 billion. This week, his head of M&A said it’s possible Honeywell could meet its goal of $10 billion in acquisitions by the end of 2018 in “one shot.”

“I don’t think you throw it out there unless you’re going to back it up,” said Joel Levington, an analyst at Bloomberg Intelligence in New York. “They are prepping people for some sort of activity.”

Honeywell has reason to be searching for a big deal: The company is projected by analysts to have its worst year for sales growth since 2009. A record $9.1 billion in cash gives it the means. Now it just needs to find the right target.

“They’ve always kind of hesitated from taking any bigger bets, but they’ve reached a stage now where the balance sheet has got so much cash on it,” Deane Dray, a New York-based analyst at RBC Capital Markets, a unit of Royal Bank of Canada, said in a phone interview. “They’ve got to do something.”

Gearing Up

A takeover of $3.1 billion airplane-parts maker Woodward Inc. would make “perfect sense” because it would mesh well with Honeywell’s aerospace offerings, said Scott Lawson of Westwood Holdings Group Inc. Brady Corp., a $1.3 billion company, manufactures identification tools such as employee badges and would complement Honeywell’s safety products, according to Bloomberg Intelligence’s Levington. Another possibility is Yokogawa Electric Corp., a $2.8 billion Japanese producer of process-automation equipment.

Honeywell could also be a buyer of Motorola Solutions Inc., the $14.5 billion maker of two-way radios that’s exploring a sale, people familiar with the matter have said.

A big deal would add to what is already the strongest start for industrial takeovers on record, according to data compiled by Bloomberg. Dimming growth prospects are encouraging industrial companies to put their cash to work on takeovers. Last year acquisitions totaled $286 billion -- the most since 2007.

“The pace is definitely going to continue to be very, very strong,” Levington said. “All of the catalysts are there for more acquisition activity to happen.”

Rob Ferris, a spokesman for Morris Township, New Jersey-based Honeywell, declined to comment on acquisitions in a phone interview. Representatives for Fort Collins, Colorado-based Woodward and Milwaukee-based Brady didn’t respond to requests for comment.

M&A Push

A year ago, Honeywell announced a plan to double spending on acquisitions to $10 billion or more over the next five years to help speed sales growth. CEO Cote appointed Roger Fradin, previously the head of Honeywell’s automation and controls unit, to head up the bigger push on M&A. About 70 percent of the deals Honeywell has made since 2002, when Cote became CEO, were done by Fradin’s division. Fradin took over that area in 2004.

Honeywell publicly disclosed just one purchase of size last year -- a $185 million acquisition of Datamax-O’Neil. At the company’s investor day Wednesday in New York, Fradin said he was frustrated at the pace of acquisitions. Record equity valuations have made it harder to find targets that meet Honeywell’s stringent cost-savings and return criteria, he said.

That said, his message to investors for 2015: Expect more and larger deals.

‘Good Stuff’

Cote, 62, said he’s looking for targets in the $4 billion or less range, though he didn’t rule out a bigger purchase. Fradin hinted that an acquisition of as much as $10 billion was possible. Honeywell hasn’t spent more than about $2 billion on a public takeover since the current company was formed through the combination of AlliedSignal Inc. and Honeywell in 1999.

“We’ve got a lot of irons in the fire and a lot of good stuff on the way,” Fradin said. Honeywell now has “bigger eyes when it comes to M&A.”

That’s probably a good idea. Honeywell’s cash has ballooned to the most since 1990, trailing only General Electric Co. and Boeing Co. among the companies that make up the Standard & Poor’s 500 Industrials Index, according to data compiled by Bloomberg. Also, Honeywell has room to add about $7 billion to its current debt load and maintain its current credit rating, according to Levington of Bloomberg Intelligence.

“Investors are going to start getting frustrated if it just continues to get piled up,” said Joe D’Angelo, a Toronto-based fund manager with CI Investments Inc., which holds Honeywell shares. Acquisitions “give them an extra leg to the growth story.”

Sweet Spots

Honeywell makes a wide range of aerospace parts, including engines for Reaper drones, avionics for F-15 fighter jets and cockpit controls for Boeing airliners.

Aerospace and security are two of Honeywell’s “sweet spots” and those may be among the areas it looks for acquisitions, according to RBC’s Dray.

On the security side, Brady could be a possibility. The identification card and signage firm was one of 48 potential industrial targets identified in a Bloomberg Intelligence screening. In aerospace, Woodward might be a good fit, though it’s not necessarily for sale, said Lawson, a vice president at Westwood, which oversees about $20 billion including Honeywell stock.

Woodward makes aircraft turbine control systems and flight-control equipment, as well as electrical systems. After falling 2.8 percent this year, it trades at a lower earnings multiple than most other similar-sized makers of aircraft and aerospace parts, so Honeywell could potentially get it for a bargain.

Japanese Candidate

Yokogawa -- the Japanese industrial company-- would be a “phenomenally good” takeover candidate, according to Walt Boyes, a principal at Spitzer & Boyes, a Chestnut Ridge, New York-based consultant. Honeywell could buy Yokogawa just for the company’s field-instrumentation operations and then shut down the control-systems business since Honeywell already has “all that in spades,” Boyes said. “There’s a huge amount of synergy potential.”

The biggest opportunity for Honeywell may be in the market for oil and gas processing equipment, said Nick Heymann, a New York-based analyst at William Blair & Co. The company may be able to find discounts there after the slump in oil prices, he said.

Disciplined Spender

Doing a bigger deal doesn’t mean overspending. Cote is “averse to giving in on their acquisition discipline” so “the deals that don’t qualify aren’t going to happen and they’ll keep looking for other things,” said Shannon O’Callaghan, a New York-based analyst at UBS AG. “He spent his whole tenure saying, ‘Don’t worry, I won’t blow the cash.’”

Motorola is an unlikely target for Honeywell, O’Callaghan said. Besides Motorola’s large size being a hurdle, the company in October completed the sale of its mobile-computing unit that Honeywell would want most to Zebra Technologies Corp. for $3.45 billion, Callaghan said.

“The piece of Motorola that overlaps with them was sold to Zebra, so if they were going to be interested in Motorola, that piece is gone,” he said.

If the company can’t find acquisitions, any net cash beyond $1 billion to $2 billion will be deployed on share repurchases, Cote said at the investor meeting. That provides a backstop against shareholder complaints about Honeywell’s growing dry powder, said Lawson of Westwood.

When he does decide to make a move, Cote has probably earned the benefit of the doubt from investors, said D’Angelo of CI Investments.

“I’m confident that when they feel like they can do acquisitions, they’re going to do ones that make sense,” he said. “They feel they can execute on M&A now, so I’ve got to believe the environment is lining up for them.”