Navigating Through Acquisitions, Mergers & Consolidation
Bryan M. Rogoff, OD, MBA, CPHM, FAAO
With consolidation and new competition, the eye care industry is constantly changing where practice owners have to repeatedly evolve to remain competitive. It is a necessity to be abreast of these changes to understand which industry partners provide the most value for their practice and patients. Acquisitions, mergers, and consolidation are not the new words in eye care industry publications, however, they have become more mainstream. Industry partners have common interests to serve patients and are constantly searching for innovations to provide comprehensive solutions. As technology evolves, it plays an enormous role by integrating and expediting the complex stages of consolidation. What exactly does that mean for you, the eye care practitioner, and how will it affect your practice?
To understand what is happening in the industry, it is helpful to understand the exact definitions of acquisitions, mergers, and consolidation and how each one has different strategies. An acquisition is a process where one company buys or purchases all, or most of, the shares in another company and is typically executed for the purpose of gaining market share, gaining resources, or to ensure expansion.1 It is usually a friendly transaction because the purpose is to build on the strengths or weaknesses of the core competencies of the acquired business and to capture synergies; however, they can become hostile.2 In acquisitions, both companies survive after the process. However, with mergers, only one company survives afterward, or the acquired company is absorbed by the purchasing company. A merger is similar to acquisitions in the way one company purchases another but combines all the interests of both into a much stronger, single entity. Usually, mergers are referred as “mergers and acquisitions” or “M&As” and are done to achieve fast growth of market share, revenue, and profitability by influencing supply chains, but can also be done to eliminate current or future competition.3
Consolidation is different and is typically done when an industry is fragmented. It is also referred to as an amalgamation because of the union of smaller companies into a larger company through mergers and acquisitions.4 Usually, consolidations result in a new entity with the expectation of increasing market share and profits and decreasing costs by combining talent, expertise, and/or technology to achieve scalability. By eliminating duplicate assets, consolidated companies have greater financial savings and increased efficiencies. Consolidating companies reduce competition along with industry suppliers that give greater economies of scale and negotiating leverage. There is a typical life cycle where the Harvard Business Review conducted a study of consolidating companies that can be useful to prepare a strategy for practice owners once M&As are announced. Stage 1 is “opening” where companies are building a footprint and focusing on profits; Stage 2 is scaling by acquiring competition and retaining the best employees and talent; Stage 3 is focusing on the core competencies and business structure while fixing weak links; and lastly, Stage 4 is about balance and alliance where consolidators defend leading positions while finding new ways to grow incremental market share and not become complacent. Success is determined by how quickly companies move through each of the stages.5
For private practice owners, this disrupts everyday practice models and owners have to be just as nimble and dynamic as consolidators. ECPs must have a distinct value proposition for patients regarding having a niche practice or a destination. To be a survivor of this market, ECPs should use their advantage of being more dynamic and having strong leadership and management styles than larger, slower players. Utilize key resources and good industry partners that provide the most value to your practice and patients. This includes partners who include a variety of solutions for clinical care, practice modalities, and support state and national legislative agendas. These partners have more investment in your success and have resources to help your practice succeed. Private practices have fewer controls that provide expedited information regarding expenses, inventory and cash flow management where changes can be made more quickly without any bureaucracy. Technology has become more affordable for ECPs to remain competitive with larger competitors, especially in the areas of financial key performance indicators, inventory management, and marketing.
Bryan M. Rogoff, OD, MBA, CPHM has a unique background in areas of holistic eye care, business management and healthcare reform. He specializes in LEAN clinical management and operations, technology implementation, healthcare strategy, and strategic partnerships. Currently, he serves as a consultant for for the FDA, Immediate Past-President & Education Chairperson for the Maryland Optometric Association, Federal Keyperson and Meetings Committee Member for the American Optometric Association, reviewer for the Council on Optometric Practitioner Education and is the Founder of Eye-Exec Consulting, LLC. To contact Bryan, visit www.eye-exec.com or email firstname.lastname@example.org. He can also be found on LinkedIn, Facebook, Twitter and Instagram.