A good fit?
As with any acquisition, there is substantial risk to customer base and revenue when attempting to integrate, and this deal is no different. The three main challenges facing Philips Healthcare in its integration are customer cannibalisation, portfolio integration and whether to redefine core strategy for health informatics.

Customer cannibalisation, while at first glance could be viewed as a major issue, may in fact be the lesser of these three challenges. While there will be some instances in the short-term of Philips and Carestream products going “head-to-head” in current procurement deals, on closer inspection there is limited crossover between the two firms’ customer base; in fact, they are almost complementary. In North America, Philips has long pursued a strategy targeting larger hospital groups, integrated delivery networks (IDNs) and academic hospitals, resulting in a top 5 market share. In contrast, Carestream has predominantly focused on small regional community hospitals and midsize providers, failing to gain any real market share traction in the larger customer segments, resulting in being ranked 7th. Thus, there is limited crossover in customer base today. Perhaps the biggest challenge lies ahead, when large IDNs or academics using the Philips Intellisite platform expand and acquire smaller providers that use Carestream Vue products. Will Carestream customers be forced to adopt the less flexible Philips platform, or will the combined entity find a means to integrate closely enough to reduce the need for "rip and replace"?
In Western Europe, a diverse market in which each country market has unique context and competitive make-up, the likelihood of customer cannibalisation is more limited, given the existing customer base of each firm. Carestream has a strong presence in Western Europe for radiology IT, with a business that is a third larger than that of Philips. However, its biggest market presence is in Northern Europe (U.K. and Nordics) and Southern Europe (Italy and Spain). In contrast, Philips’ customer base is more focused on western and central European markets, such as Benelux, France and DACH.

In emerging markets, the complementary nature of the two businesses is also evident. In Latin America, Carestream is market leader for radiology IT, with its product deemed to better suit the needs of the domestic market in Brazil and Mexico. It also has a strong presence in the emerging South East Asia market, while Philips has been targeting more mature markets in Japan, China and the Middle East. The limited crossover between customer base thus makes the timeline for integration less pressing in many markets, with the acquisition unlikely to upset most customers in the short-term.

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