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Special report: Acquisitions rife in medical parts industry

by Diana Bradley , Staff Writer
This story first appeared in the August 2012 issue of DOTmed HealthCare Business News

Mergers and acquisitions have always been routine in the medical equipment parts sector, but experts note a major surge in recent years. It has become increasingly evident that unless a company has a niche model that is not easily duplicated, it has difficulty competing against those with greater resources.

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“When you think about it, parts are a critical component of daily operations for a service provider,” says Mark Suffridge, vice president and general manager of ReMedPar Inc., a centralized source for quality assured diagnostic imaging parts and technical support. ReMedPar acquires systems from around the world and utilizes rigorous ISO-90001:2008 certified processes to test and qualify parts before placing them in finished goods.

“It is only natural that service organizations would look to acquire or merge with parts organizations as a way to enhance their own supply chain,” he adds.

Recent mergers and acquisitions include the ARAMARK Healthcare/MasterPlan Inc./ReMedPar merger and the Philips Healthcare/AllParts Medical acquisition. Additionally, this year alone, BC Technical Inc., a large third-party dealer and servicer of molecular imaging equipment and parts, acquired three companies: Consus Medical Imaging, Xpert, Inc. and RA services, Inc.

“I am seeing service organizations buying parts companies to bring as much in-house as they can,” says Ken Smith, executive VP of sales and service for BC Technical. His company stocks around 40,000 parts in inventory.

He says the increase in acquisitions has occurred largely during the last two to four years. “When you look at who is doing the buying – for example, Philips and ARAMARK – it is about controlling the parts. Parts are a high margin business, and so if they can control those parts, they can control the cost of services.”

ARAMARK is shifting its focus from being an asset manager to diagnostic imaging and providing the services directly, so the company wants to have field engineers and parts, and Philips is doing the same thing, according to Smith.

“All of the original equipment manufacturers (OEMs) are looking for additional channels for service revenue,” adds Smith. “They are seeing the service revenue go down because of competition and pricing pressures from the economy, so they are looking outside of their core businesses. For instance, GE Healthcare is looking to service Siemens Healthcare and Philips’ equipment.”
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