Danaher Corp. (DHR) should be able to spend up to $6.5 billion on acquisitions over the next three years, CEO Larry Culp said Monday.

Culp said the diversified manufacturer, which is best known for producing Craftsman brand tools for retailer Sears, said the company's cost reduction initiatives and cash-generating potential leaves it well-positioned for buying other companies in a business climate where leveraged buyouts by private equity firms have become increasingly more difficult.

"We feel good about this environment as a strategic buyer," Culp said during a speech at the Electrical Products Group Spring Conference in Florida. "We will be busy this year. We intend to be an active acquirer during the downturn."

Some of Danaher's rivals that are typically aggressive acquirers, such as Illinois Tool Works (ITW), have lowered their acquisition expectations this year, citing companies' reluctance to sell when sales and profits are slumping.

Culp acknowledged the number of companies for sale is less, but those that are interested in selling have recently stepped up their efforts. The Washington D.C.-based company made three small acquisitions in the first quarter after doing 17 deals in 2008.

"We're finding we're having more productive conversations," he said.

Culp said the business sectors Danaher is focusing on are medical technologies, testing and measurement equipment, water treatment and professional instrumentation.

The $6.5 billion the company expects to have available for acquisitions between 2009 and 2011 includes $750 million in cash and $5.75 billion in anticipated cash flow from its businesses and debt capacity.

Culp said Danaher's recent cost-reduction efforts should yield annual expense savings of $250 million. The company has reduced its workforce by 4,100 employees and closed 29 plants in response to lower demand from end-market customers.

"We continue to take advantage of this environment to take structural costs off," he said.

Danaher's stock was recently up 0.62% at $58.20 a share.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com