Managing Mergers and Acquisitions: Lessons from Consolidation of the Medical Device and Diagnostic Industries
Strategic Management
About the Author
Brian Smith is an experienced professional with 20 years experience in the medical device
and diagnostic markets.
He is a Doctoral Researcher at Cranfield University School of Management and Managing Editor of the International Journal of Medical Marketing. As Management Consultant of PragMedic, he consults and trains widely within the industry. He is also the author of the Clinica Guide to Successful Marketing Strategies in the Medical Device and Diagnostic Industries.
Successful mergers and acquisitions (M&A) depends on high-level strategic fit, rigorous partner selection and painstaking integration. Managing Mergers and Acquisitions from Clinica Reports will provide you with all the help and practical advice you need to achieve these objectives.
As well as in-depth interviews with senior executives responsible for many major M&As, this work also reports on many senior line managers' experiences of implementation and outcomes. This is supported by a review of the latest management research into what differentiates success from failure.
The report includes six case studies from leading medical device and diagnostic companies:
This report will answer your key questions
PUBLISHED: SEPTEMBER 2000
PAGES: 112
REF: CBS850E
PRICE: £750/$1,575/¥180,000
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CONTENTS
LIST OF TABLES
LIST OF FIGURES
ABOUT THE AUTHOR
EXECUTIVE SUMMARY
ABBREVIATIONS
SCOPE AND METHODOLOGY
CHAPTER 1 CONSIDERING MERGERS AND ACQUISITIONS
1.1 Begin with the end in mind: mergers and acquisitions as a component of corporate strategy
1.2 Strategy alignment: consolidation as a consequence of market forces
1.2.1 Factors driving industry consolidation: strategic forces acting on the medical device and diagnostic industry
1.2.1.1 Globalisation
1.2.1.2 Product life cycle effects
1.2.1.3 Buyer power of purchasers
1.2.1.4 Buyer power of distributors
1.2.1.5 Technology convergence
1.2.1.6 New technologies
1.2.1.7 Enabling technologies
1.2.1.8 Newly emerging segmentation patterns
1.2.1.9 Capital intensification
1.2.1.10 Value chain shifts and disaggregation
1.2.1.11 Political policy shifts
1.2.1.12 Regulatory shifts
1.2.1.13 Demographic patterns
1.2.1.14 Social expectations
1.3 Strategic growth options: the r�le of merger and acquisition in corporate growth strategies
1.3.1 What is the best direction in which we should grow?
1.3.1.1 Market Option 1: market penetration
1.3.1.2 Market Option 2: new product development
1.3.1.3 Market Option 3: new market development
1.3.1.4 Market Option 4: diversification
1.3.2 What is the best method of moving in that direction?
1.3.3 Management aims and motives: strategic objectives in mergers and acquisitions
1.3.3.1 The objectives of managers during merger and acquisition activity
1.3.3.2 What are the real reasons behind our merger or acquisition plans?
1.3.3.3 Does the type of merger or acquisition we are contemplating align with our objectives?
1.4 The right thing to do? � a summary of good practice when considering mergers and acquisitions
CHAPTER 2 SELECTING PARTNERS AND TARGETS FOR MERGERS AND ACQUISITIONS
2.1 Lessons in partner and target selection: the four critical questions
2.2 Has the company performed well in the past?
2.2.1 Impact of the product pipeline
2.2.2 Implications of product portfolio
2.2.3 Implications of geographical concentration
2.2.4 Influence of market changes
2.2.5 Reliability of financial data
2.2.6 Impact of corporate objectives
2.2.7 Fragmented nature of the medical device and diagnostic market
2.2.8 Rate of industry consolidation
2.2.9 Impact of regulatory decisions
2.2.10 Mobility of human assets
2.2.11 Impact of product life cycle effects
2.3 Will the company perform well in the future?
2.4 Could the company perform better with us?
2.4.1 Sources of synergy in medical device and diagnostic markets
2.4.2 Implications of synergy realisation for selection
2.5 Will the company perform better with us?
2.5.1 Culture: the difference between could and will
2.5.2 Cultural fit assessment and its implications
2.6 Answering the four questions: a summary of selection lessons
2.6.1 Consider all four critical questions when assessing a partner or target
2.6.2 Use market knowledge and strategic context to narrow down options
2.6.3 Use financial analysis methods that reflect the particular situation
2.6.4 Use portfolio analysis to tailor and improve the selection process
2.6.5 Identify possible synergies in detail and think through the implications of realising them
2.6.6 Assess the implications of cultural fit for the likelihood of success
CHAPTER 3 MAKING IT HAPPEN: OBJECTIVES, PROBLEMS AND SOLUTIONS IN IMPLEMENTING MERGERS AND ACQUISITIONS
3.1 Prepared minds: the key issue in merger and acquisition integration
3.2 Integration objectives: the mooring point for integration implementation
3.3 Integration problems: forewarned is forearmed
3.3.1 Objective-based approaches: a distinguishing characteristic of excellent integration
3.3.1.1 Project team design
3.3.1.2 Process and systems design
3.3.1.3 Speed of integration
3.3.1.4 Internal communication processes
3.3.1.5 Response to variance from planning assumptions
3.3.1.6 Strategic leadership
3.3.1.7 Customer focus
3.4 How it happens: a summary of integration and implementation lessons
CHAPTER 4 THE OUTCOMES OF MERGERS AND ACQUISITIONS
4.1 Do mergers and acquisitions lead to superior performance?
4.1.1 Performance measurement
4.1.2 Merger or acquisition type
4.1.3 Lack of a valid control
4.2 Are synergies realised?
4.3 Lessons from the outcomes of mergers and acquisitions
4.3.1 Corporate success cannot be correlated directly to mergers and acquisitions
4.3.2 Synergism is a result of well managed mergers and acquisitions
4.3.3 Small, simple synergies are more likely to be realised than large, complex synergies
4.3.4 Merger and acquisition may be more of a necessity than a panacea
CHAPTER 5 SUMMARY AND CONCLUSIONS
5.1 The 20 most important lessons learned from the consolidation of the medical device and diagnostic industry
5.2 Afterword: the medical device and diagnostic market beyond 2000
CHAPTER 6 EXEMPLAR CASE STUDIES
6.1 Axis-Shield plc
6.1.1 Introduction
6.1.2 Interview
6.2 Elekta AB
6.2.1 Introduction
6.2.2 Interview
6.3 Seton Scholl London International Ltd
6.3.1 Introduction
6.3.2 Interview
6.4 General Electric Medical Systems
6.4.1 Introduction
6.4.2 Interview
6.5 Lohmann & Rauscher
6.5.1 Introduction
6.5.2 Interview
6.6 Baxter International Inc
6.6.1 Introduction
6.6.2 Interview
REFERENCES AND FURTHER READING
List of Tables
Table 1.1 Types of merger and acquisition
Table 3.1 Examples of integration objectives derived from management objectives
List of Figures
Figure ES.1 In excellent companies, the whom and the how of merger or acquisition derives from corporate strategy
Figure 1.1 The expansion options matrix
Figure 1.2 The market options matrix
Figure 1.3 Mergers and acquisitions in the continuum of involvement
Figure 1.4 Explanations of merger activity
Figure 2.1 The directional policy matrix
Figure 2.2 The structure of organisational cultures
Executive Summary
The purpose of this report is to aid medical device and diagnostic industry managers who are at some stage of the mergers
and acquisitions process. It is intended to be useful to readers who are either considering or implementing this difficult and
complex management process. It does this by gathering, analysing and adding expert opinion to the lessons that have been
learned from the recent phase of industry consolidation.
Given the complex and far-reaching nature of mergers and acquisitions, the preparation of this report required the use of a variety of information sources. Firstly, in-depth interviews with senior executives in a number of recently-merged or acquired companies. These provided detailed and mostly qualitative information that was specific to the medical device and diagnostic industry. Secondly, an extensive survey of all the public pronouncements and news stories concerning medical device and diagnostic industry mergers and acquisitions of recent years was carried out. This provided a less detailed but broader-based view of the massive changes in industry structure in the last few years. The third source of information was a series of interviews, informal and anonymous, with middle and senior managers who have been personally involved in this phase of industry consolidation. This provided information that, whilst anecdotal, gave greater depth and veracity to the public pronouncements of companies. Lastly, several database searches of the academic management research literature were employed to uncover the latest thinking on mergers and acquisitions. This was not industry-specific, but provided a source of information that was more rigorous and objective than the previous three sources. This report is structured around the three principal parts of the merger and acquisition process; consideration of merger or acquisition, selection of partners or targets and implementation of the integration process. In reality, of course, these three divisions blur and overlap. Each chapter compares the practice of leading players and of less effective companies and concludes with the lessons practising managers may draw from this comparison.
Chapter 1, Considering Mergers and Acquisitions, describes the way that effective companies embed this process into their overall corporate strategy. It illustrates how companies assess the market forces acting on them and choose their strategic direction accordingly. It then goes on to explain the way these companies consider a whole range of expansion options before, perhaps, selecting merger or acquisition. This chapter, therefore, reveals how effective companies enter the selection process already ahead of their competitors by fully understanding the strategic context of their merger or acquisition choice.
Chapter 2, Selecting Partners and Targets, analyses the approaches taken to select merger and acquisition partners. It depicts an industry in which the text-book, financial assessment approaches to selection are replaced or augmented by industry-specific qualitative approaches. It shows, too, the depth and breadth of synergy identification questions that differentiate effective companies from their less successful competitors. This questioning is characterised by attention to 'soft' cultural factors as well as the traditional 'hard' management measures. This chapter demonstrates how effective companies resolve and negate many of their implementation problems before the deal is even signed.
Chapter 3, Making it Happen: Objectives, Problems and Solutions, deals with the implementation and integration aspect of mergers and acquisitions. It begins with an explaination of how exemplar companies moor their integration processes against the synergy realisation objectives that justify the deal. It goes on to explain how these objectives are used to predict areas of potential integration difficulty and how excellent companies build their solutions around those difficulties. Essentially, it reveals the major dimensions of integration solutions that are used to tailor effective, situation-specific responses to integration barriers.
Chapter 4, The Outcomes of Mergers and Acquisitions, examines the complicated and potentially misleading outcomes of mergers and acquisitions. By careful analysis, it reveals that mergers and acquisitions are not a panacea for all corporate growth objectives. Instead, they are increasingly attractive options that apply especially to medium-sized and large companies, but only if executed effectively.
Chapter 5, Summary and Conclusions, condenses the 20 most important lessons learned in the course of this research and concludes with a summary of how the medical device and diagnostic industry is being shaped by mergers and acquisitions. Importantly, it points to a future in which the competency of executing mergers and acquisitions will eventually rival more traditional technical and marketing competencies.
Chapter 6, Exemplar Case Studies, contains in-depth reports of the interviews carried out with leading medical device and diagnostic companies in the preparation of this work.
The report concludes with a comprehensive list of references and further reading.
The conclusion of this report is that effective merger or acquisition is the result of careful and rigorous development of the corporate strategy. The painstaking nature of this process, which characterises exemplar companies and sets them apart from their competitors, is detailed in this report.
© PJB Publications Ltd. 2001
All rights reserved.