Several weeks ago I was in attendance at the National Lymphedema Network Congress in Dallas, Texas where at one point I found myself standing in the exposition hall, surveying the changes that have occurred over the past few years among the industry participants, and the effect it has had on this conference.
The biggest revelation? There are five fewer exhibitors, in terms of booth space from what there was just four years ago, and as such, the overall exhibit hall was smaller than past congresses. What is most interesting, however, was that all five of these past exhibitors were still present at the meeting, and their brands and products are still represented. All five are now part of larger companies that have completed acquisitions over the past few years.
You may be thinking, “Companies buy other companies all the time.” Every week, if you scour the financial section of your favorite news source, you will see new acquisitions or spot that a certain company merged with someone else. You will find statements from CEOs on why this move makes sense and how everyone will benefit from this move, from customers to shareholders. Most of these mergers and acquisitions go unnoticed, as they have little to no impact on us individually.
But have you ever stopped and really asked yourself what the impact truly is, and what is gained when two entities become one?
We don’t have to go back to 350 B.C., give or take, to determine how Aristotle came up with “The whole is greater than the sum of its parts,” as we have numerous examples in our world today that we can learn from.
In the corporate world, we look at the benefit of mergers and acquisitions through a “synergy lens.” When two organizations merge, the ultimate success, or failure, is its ability to take advantage of the synergies that are available. Can the sum of the parts equate to something greater as a single entity versus remaining separate? In my experience, the value of merging is directly related to what can be achieved together. So, what are we looking for?
“Expanding into new markets is another positive element gained from mergers and acquisitions. By coming together, companies are able to take products into new areas that were not achievable separately.”
Corporate Merger Cost Savings
One of the easiest ways to understand the opportunities of bringing two organizations together is the ability to do more with less. There are associated costs with running any business that each separate entity must maintain to exist. Buildings, offices and rent, staffing (people who do the work), computer and phone systems, inventory of product, customer service (people who answer customer questions), sales people, marketing and advertising, etc.
These are a few examples of things that each company alone must support. However when two entities become one, many of these costs are redundant, and often the resources of one of the companies can actually support the work of both, resulting in significant cost savings in fixed costs when the two become one.
Gaps in Business Operations
Bringing two organizations together allows companies to fill gaps in an existing organization. The other company has a resource that the other does not currently have, and by coming together, they are able to take advantage of this new resource almost immediately.
Otherwise, if they were to develop the resource themselves, it may take significant investment and time. An example of this was when we sold circaid medical to medi GmbH. Circaid was a small, predominately American company, whereas medi is the largest compression company in the world with sales people and distributors throughout the globe.
By becoming a part of medi, the circaid product line instantly had access to new markets throughout the world which would have taken years and significant investment to reach. Other gaps might exist in terms of products. Often, when two groups come, they are able to offer a more comprehensive product and/or service offering.
New Business Markets
Expanding into new markets is another positive element gained from mergers and acquisitions. By coming together, companies are able to take products into new areas that were not achievable separately.
Another aspect to consider is the concept of alliances. Often times, it makes sense for companies to merge to some form of an alliance where together they can accomplish more than they can individually. In our world, there are a couple of examples of alliances that stand out.
The American College of Phlebology Foundation (ACPF) is one where medical product and services companies have come together with medical professionals to fund a series of initiatives in the past 10 years to advance the field of venous and lymphatic medicine. There are others, such as the formation of the American Board of Venous and Lymphatic Medicine (ABVLM), which is actively credentialing physicians in the field of venous and lymphatic medicine, and the Venous PRO Registry, where clinical data and patient-reported outcomes are now being captured which will enable us to support best practices.
Through the Foundation, an alliance is created where each participant is able to provide a small amount of funding, that when combined with the other donors, is able to make lasting investments in the field that, individually, would not be possible.
“Bringing two organizations together allows companies to fill gaps in an existing organization. The other company has a resource that the other does not currently have, and by coming together, they are able to take advantage of this new resource almost immediately.”
Another alliance you may have begun to hear about is the United States Compression Alliance. It is a relatively new alliance of compression therapy manufacturers and clinician advocates for compression therapy. This alliance is focused on addressing the key opportunities that affect the acceptance and use of compression therapy in our medical communities, investing in research and education opportunities.
The alliance is committed to working closely with the medical societies associated with venous and lymphatic medicine, since more is significantly achieved together than individually. So while the companies involved in the alliance are competitors, the alliance enables combined resources that invest in general opportunities that benefit all the companies involved and in the field of venous and lymphatic medicine overall.
Addressing Vein Industry Fragmentation
This brings me back to that floor in Dallas. It reminded me about the fragmentation of the various medical societies associated within our medical field. For example, in the world of lymphology, we find a myriad of societies such as; National Lymphedema Network (NLN), Lymphatic Education & Research Network (LE&RN), Lymphology Association of North America (LANA), American Lymphedema Framework Project (ALFP), Lymphedema Treatment Act (LTA) and I apologize if I am overlooking other organizations focused on lymphedema in the U.S.
Each of these organizations has a unique mission and vision in the field of lymphology and each are making contributions. However, you can’t help but wonder if there is a synergy in the mission and vision of a few of these organizations, and if they were to come together, would they be able to achieve even greater results?
What might be some of the synergies we could look for in such a merger? First, the volunteer pool would become deeper. Today with multiple organizations, we see that a greater number of volunteers are needed to accomplish the work of each group, whereas together as one group, perhaps more can be accomplished with fewer volunteers. Second (and perhaps more importantly), there could be greater funding together versus individually.
I can share with you from a corporate perspective that we analyze our investments each year into the different societies we partner with, and the more societies we choose to align with, the greater ability we have to divide the pie. So the question would be, if corporate partners divided the funding among two or three parties instead of five to six, could more (or perhaps larger) goals be accomplished?
Another positive aspect of synergy could be a louder voice. When organizations come together, numbers speak louder. When it comes to public policy and advocacy, for instance, larger numbers are more influential in swaying opinions. Of course when organizations come together, not everything is always better. As such, it is important that we analyze the potential negatives of unification.
The Halted ACP/AVF Merger
Most of us are aware that the ACP and the AVF invested time and finances this past year to explore the concept of unifying the two societies, and fortunately or unfortunately, the decision for now is to continue as individual societies.
So as members of one or the other or both societies, we will have to wait and see if the advancement of venous and lymphatic medicine would have been better served together? While a merger is not imminent, there are plenty of opportunities for the two groups to work together and form alliances where it best serves the mission and vision of both groups.
We can expect to see the corporate world continue to pursue the rewards of synergy through acquisitions, mergers and alliances, it looks like in the foreseeable future, we will see the societal world of venous and lymphatic medicine continue as a bowl of alphabet soup—ACP, AVF, AWC, NLN, LE&RN, LTA, LANA, ALFP and on and on. What do you think? Was Aristotle correct, i.e., is “the whole really greater than the sum of the parts?”