PALO ALTO (CNN/Money) - The most benign explanation for the spectacular decline of Tyco and its many component parts is the law of big numbers. Simply, a company that big finds it increasingly tough to grow.

A less charitable view would be the assumption -- one held for years by short sellers -- Tyco's management is a bunch of no-goodnicks. That perspective was given a boost with the resignation Monday of CEO Dennis Kozlowski under the cloud of a criminal tax-avoidance investigation. (See more.)

I have a different theory. We (the media, investors) want growth. It's growth that excites. Solid execution, cash generation, responsible business ethics -- those quaint notions are fine for some boring widget manufacturer. But who'd want to invest in a company that doesn't grow?

And so public companies will do anything to convince investors they are capable of growing. If the products they've got don't grow, the solution is simple: Buy more. According to Bermuda-based Tyco's (TYC: Research, Estimates) most recent annual report, the company completed acquisitions valued at $30.5 billion between fiscal 1999 and fiscal 2001. The acquired companies included such legitimate businesses as Mallinckrodt, a health-care products manufacturer, and CIT Group, a financial services firm that looks a lot like GE Capital.

Tyco dropped plenty of cash for those acquisitions, some $17.5 billion in all. Where Tyco found all that cash is explained on its balance sheet. Long-term debt in 1998 was $5 billion, or about 26 percent of its revenues that year. By fiscal 2001, long-term debt was $38 billion, or 6 percent more than its revenues.

The tragedy is that by and large there's nothing wrong with any of the businesses Tyco acquired. They may not be exciting. And individually they may not grow that much. But they generate cash. They employ hundreds of thousands of people.

But because Dennis Kozlowski was on the cover of magazines and because he did lots of deals -- employing lots of investment banks -- he was able, for a while, to convince investors that the sum of these parts in Tyco was worth far more than each ho-hum business taken individually. Public investors, in effect, were willing to pay more for assets that generated little excitement as private companies, parts of private companies or independent public companies without much buzz.

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Now Tyco will have to pare down, and it's certain that selling off chunks will make Tyco a non-growth story. But there's one thing that's worse on Wall Street than non-growth, and that's instability. Salomon Smith Barney analyst Jeffrey Sprague told clients Monday he'd be willing to reconsider his new "neutral" rating on Tyco "once we have evidence of internal management stability" or when "the company succeeds with its restructuring plan."

I'll bet private purchasers are lining up to get at some of Tyco's better properties, hoping they can get them at distressed prices. Of course public investors paid top dollar for Tyco's stock when it traded in the $50-range for the past two years. On Monday, public investors -- burned by the yen for growth -- were willing to pay just about $16 per share.

Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at adam_lashinsky@timeinc.com.

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