Diversified technology and manufacturing company 3M (NYSE: MMM) announced this morning that it would acquire specialty ceramics maker Ceradyne (Nasdaq: CRDN) for about $860 million, or $35 per share. This represents a 43% premium; shares of both companies were up on the news. In morning trading, shares of 3M went up over 2%, while investors quickly priced the acquisition premium into Ceradyne's stock, sending share prices surging nearly 43%.

Although 3M is probably best known for its ubiquitous Scotch tape and Post-it notes, the innovation-focused company thrives by leveraging technologies into diverse applications in many different industries. Ceradyne's durable and lightweight ceramics are used in demanding platforms like power generation and combat armor, and 3M thinks it can find even broader uses for the company's technology. Ceradyne will be absorbed into 3M's energy and advanced materials division, part of 3M's industrial and transportation business.

The acquisition shouldn't be too surprising, after CEO Inge Thulin discussed last Wednesday his intention to break with 3M's traditional strategy of pursuing a large number of small tuck-in acquisitions, and instead focus on buying up a smaller number of larger companies. The success of the Ceradyne acquisition will be an important proving ground for this new strategy and for Thulin, who just entered the top job this year.

Thulin's predecessor, George Buckley, had a very successful record of generating value from outside purchases, spending 4% of revenue annually on acquisitions. Under his tenure, 3M was never required to write down goodwill on a purchase. Thulin's 30 years of experience working under Buckley at 3M helps to reassure investors that a steady hand remains on the wheel, even after the company's $550 million bid for Avery Dennison (NYSE: AVY) failed last month. 3M had planned to buy up Avery Dennison's office and consumer products segments, which makes products like tags, labels, and sticky notes, until the Department of Justice threatened an antitrust suit.

Given the potential applications 3M could find for Ceradyne's technology, it looks like 3M got a good price. While 3M will shell out $860 million on the purchase, the net cost to 3M after accounting for cash and short-term assets on Ceradyne's balance sheet will be about $670 million. With annual revenue of about $500 million, this values Ceradyne at about 1.3 times sales, and a little under 13 times earnings.

Over the long term, there's no reason to expect that 3M won't be able to unlock value in Ceradyne's technology through its global reach and formidable research and development capabilities, as it has with many other acquisitions. 3M's ability to leverage purchases into new markets is just one of the reasons the Motley Fool believes the company has a highly sustainable business model built for the long haul. To find out more, and discover two more solid dividend payers of the Dow, read the Fool's report on three Dow stocks dividend investors need. This report is free, but it's only available for a limited time, so click here to get your copy now.