Cardinal Health (NYSE:CAH) got its start when Robert Walter, a 20-something Harvard MBA, purchased an Ohio food wholesaler through a leverage buyout. He soon realized there was much more growth in drug distribution and so started an aggressive mergers and acquisitions campaign to transition his business.

After 60 acquisitions, he built a powerhouse with more than $50 billion in revenues. And he hasn't slowed down, as indicated yesterday when he announced the $2 billion cash deal for ALARIS Medical Systems (NYSE:AMI).

A big concern is that Cardinal overpaid; then again, this is a recurring complaint. Yet, Cardinal has demonstrated a unique ability: actually realizing synergies from an acquisition.

Cardinal is not just a distributor of drugs. Instead, the company has grown into a diversified provider of packaging and marketing services for the drug industry, developer of drug-delivery products, and distributor of medical supplies and pharmaceuticals. The strategy of broadening its scope is a smart move, given that it appears there are pricing problems with the drug-distribution industry.

As for ALARIS, it is the developer and marketer of products for the safe delivery of intravenous medications. This is a new market for Cardinal, and it also means penetration into international markets. What's more, ALARIS is in a growth phase, with the launch of 19 products in 2003 and at least 20 more products in 2004. The company also has major customers like McKesson (NYSE:MCK), which is actually a direct competitor of Cardinal.

Walter was certainly enthusiastic about the deal, calling it a "terrific fit" and "a significant opportunity." Then again, he thinks ALARIS will bring $80 million to $100 million in pretax earnings for the end of fiscal year 2007.

But, as investors have learned over the years, there's quite a bit of wiggle room in terms of accounting for aggressive M&A.

Recently, the Securities and Exchange Commission launched a formal inquiry into Cardinal's accounting. On the face of it, the issue looks relatively unimportant. Actually, the fact that Cardinal launched a major deal is a sign of confidence on the part of management.

Perhaps the big risk factor is that, to continue to push growth, Cardinal needs to make bigger deals. And, of course, this always means bigger risks for shareholders.

Did Cardinal make a smart purchase, or pay too much? Give your opinion on our Cardinal Health discussion board.

Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.