There's no doubt the company has plenty of cash to burn, so one analyst asked CEO Joe Almeida what it takes for him to pull the trigger on M&A.

Baxter CEO Joe Almeida answered questions during the company's Q2 earnings call about M&A strategy.

Baxter International expects to generate free cash flow of about $1.1 billion this year and roughly $2 billion by 2020. Yet, the company has seemed yet a bit gun shy on medtech acquisitions. So analysts were quick on the draw to ask CEO Joe Almeida about M&A strategy during the company's second-quarter earnings call Wednesday.

"There's no doubt you have a lot of cash that you can deploy, and yet I feel like investors are waiting for you to do so," Joanne Wuensch of BMO Capital Markets told Almeida during the question and answer portion of the call. "What does it take internally for you to pull that trigger?"

The fact that the Deerfield, IL-based company is even in a position to answer such questions speaks volumes to Baxter's dramatic transformation over the past 18 months. Almeida came on board at a time when Baxter was struggling with regulatory and manufacturing problems, coupled with external headwinds that left the company's profitability wounded.

The former Covidien CEO and his team have put a lot of work into changing the culture at Baxter. In fact, Almeida said he "just bought back" almost his entire team from his old job - and that's the team that will now oversee M&A.

So to answer Wuensch's question, Almeida said it takes "a lot of conversations," and the right strategic target before his team would pull that trigger.

"You've got to make sure that you are returning money to the shareholders. You can't just make an acquisition and think that internal rate of return of 7% is good enough," Almeida said.

He clarified that large acquisitions are not at all off the table, so long as they make sense for Baxter. Larger transactions do come with much more inherited risk compared to smaller tuck-in deals though, Almeida said, but the company is open to both.

"With a better team in place, we're looking at a much more agile process to get to our targets," he said, adding that there will also be an emphasis on raising capital organically and returning money to shareholders. "So it's a win-win because we have two good avenues, and we can do both at the same time."

But to be clear, the CEO is not going to let that money burn a hole in the company's pocket. "If we do have excess cash, we will buy shares back at our discretion," he said. "... And size of acquisition is less important than the strategic fit of those companies within our portfolio."

Amanda Pedersen is Qmed's news editor. Contact her at [email protected].

[Image credit: Baxter International Inc.]