Accessing Performance and its Impact on Merger Acquisition

Introduction

A merger is often a way for a company to achieve financial and functional growth. Many companies merge to gain new markets to reach new consumers and to improve their overall team. When two companies merge, we all know that sometimes the change can be risky, but on occasion, it can be good for business. The success or failure of a company is primarily proven by the effectiveness of its interaction with its affecting factors within its environment. Some of these factors can affect the business directly, but others can affect the business indirectly as well. The first step when considering a merge is to consider and review the financial statements from both companies to ensure that the deal makes financial sense for both parties. When it comes to evaluating the potential merge between Medtronic and Boston Scientific, Corp, one would want to consider will this improve their financial growth, will they become a powerhouse against competitors, and will the major assets that they have seem useful.

Medtronic and Boston Scientific Corp. Profitability trends

Medtronic was created as a medical equipment repair shop in1949 (Medtronic.com). Mainly known for their cardiac and vascular products, which makes up primarily most of their sales. Medtronic works to deliver new and innovative medical technology solutions for many hospitals around the world. This was the start for many more devices, which has been used to improve the lives of many people. Over the years, Medtronic has developed several therapies to aid patients suffering from several illnesses. In the last year, Medtronic therapies improved the lives of more than 75 million people (Medtronics.com). This company is very successful and grossed an annual revenue in 2018 of 30 billion and now has 86,000 employees worldwide.  

Boston Scientific was started in 1979 by John Abele and Pete Nicholas in Watertown, Massachusetts as a holding company for a medical products company called Medi-Tech (Bianco, 2019). The two men received $500,000 to start up the company and raised an additional $300,000 in revenue from the company alone. In the first year of existence, the company had revenue of two million dollars.  

The company’s first products were a flexible catheter used in gallbladder surgery. The company since then has expand its product line to include catheter-based devices for use in heart, vascular, respiratory, gastrointestinal, and urological applications (Bianco, 2019). In the early 1980s the team increased their marketing technique by introducing new product development, and growth within the organization. 

The company not only focused on catheters but other products that could be used as options from the traditional ones used during surgery.  Medical imaging improvements and, less invasive procedures, the catheters allowed doctors to perform surgical procedures easier.  A perfect example would be the procedure for kidney transplant donors today.  Boston Scientific continued to grow in its industry and now has over 51 medical products that are mostly used to help patients function normally after surgery or to prevent major surgery.  As the years progressed, revenue increased from 16 million in 1983 to 380 million in 1993.  Fast forward to 2004, the company currently employs seventeen hundred staff members and had sales of over 5.62 billion in 2004.

With all information discussed on both of companies, it is also proof that a person can take a single invention and eventually turn it into billion-dollar corporation and if the two eventually merged, it would be favorable because of both businesses’ success.  Also, since, merging with a smaller successful company would also be an advantage for both entities. Also, Medtronic is a large company that generate three times the amount of revenue than Boston Scientific. For both companies, the revenue over the past few years has been affected by purchases and when it comes to profitability, Boston Scientific stands out against Medtronic on gross profit and even though both company’s revenues are proof of their successes, the merger would be very beneficial to Boston Scientific with 29,000 employees in 2017compared to 86,000 employed by Medtronic nationwide just last year alone.  The number of employees combined would allow the companies to skyrocket in business and sales, but not only that, merging could offer tax benefits, entries to global markets, increase in market share, and even aid in financial resources.

Key Financial drivers

Some key financial driversthat will help in the success of the company’s new merge would be financial plan, due diligence in terms of the mission, vision, and values, and the state of the economy. Without a clear-cut strategy, effective management with open communication between stakeholders, the merger will struggle to deliver the desired results for each party. Also, if the company is consumed with debt, been involved in many lawsuits or the finances are not in order, those issues become the new company's problems as well.

 Financial economies help with bargaining and negotiating to obtain the best interest rates possible from financial institutions. Economies of scales would help both companies due to the merger because technical economies relate to the fixed technical costs, which will reduce after the merger.  Even bulk buying will allow for discounts on materials bought in bulk quantities.  Some other key financial drivers would include the combination of medical products.  While both companies sell some of the same products, there are many products that Medtronic invented and introduced to the industry that Boston Scientific does not have and vice versa.  A combination of all medical supplies will increase the sales profit for sure.  

The financial performance after the merger is sure to increase significantly with an increase in financial resources.  This will also allow more credit worthiness in the financial markets and an increase in bargaining power for a subsidized interest rate.  Competition is no longer a business practice for the medical supply companies since they both specialize in most of the same business products.  

The evaluation of financial measures after merger

Some determinants found as a favorable financial driverwill includecollaboration and participation, suggestions from board members, stakeholders, and key staff members.  Stakeholders rely on the company's success to keep the supply chain going because it is the investors who put in their money in support of the company and in the end are concerned with the returns they receive on their investments and how much they will earn. 

Given any investment, there are always risk, especially given the number of competitors, the ever-changing market, the changes in laws and regulation, and even the product that is produced.  Some other factors for both companies include having more involvement with the decisions of the company and building stronger relationships with board of directors, keeping up with business development and investment protection. 

Medtronic total revenue from 2006 to 2019 appeared to have increase by $11,000 to $16,000.  By 2019 this amount had nearly doubled to $30,557 (Mikulic, 2019).  Medtronic total fiscal revenue for 2019 was 30,557,000, which was a 2.02 increase from 2018.  The total fiscal revenue for Boston Scientific in 2019 was 2,707 billion.  This was an increase of 14 percent on just an operational basis. 

If the company increased revenue at 14 percent operationally for the next fiscal year, that would be a profit of $400,000 in the operation area alone and not to mention increases of 9.3 percent on organic basis and 13.1 percent on reported basis.  If both companies continue the same business practices with more qualified personnel combined, the merger will be even more successful in the most critical area of all, revenue.

Financial Stability of the health care industry

The health care industry has faced many challenges when it comes to finances and the health system that put it at risk for the future. Even with this, we can see an upcoming of future drugs for patients, new and improved devices, and more investments that will be targeted to meet the needs of emerging markets. Creative, groundbreaking mergers and partnerships will be more common amongst the health care industry.  We are looking at future partnerships, such as CVS and Aetna for example, which merged their companies for more than 78 billion that created a yearly revenue of more than $245 billion. This is a change that is going to shape this industry, as well as within pharmacy and health insurance. These changes, along with future ones are going to prompt innovation, enable partnerships and collaboration, and be able to increase the use of artificial intelligent devices, while improving prevention. This may result in those within the field to be more efficient and productive.

With Medtronic and Boston Scientific, both are fast growing within the health care industry, have a strong supply chain, and continuously create new innovated devices. Not even three years from now, Medtronic’s has recently launched the first artificial intelligence system for colonoscopy at United European Gastroenterology week this year. Medtronic also announced the launch of GI “Geniusa cents intelligent” endoscopy. The GI “Geniusa cents” is the first system in the world that uses artificial intelligence to detect colorectal polyps; this provides physicians with a new solution in the fight against colorectal cancer (Stock weekly, 2019). Even with this breakthrough, there is more to come in the upcoming years that will create a new focus for providers and offer better solutions for patients, as well as bring in more revenue to remain constant in this ever-changing health industry.

Conclusion

In conclusion, as said earlier in this paper, company mergers are very risky. Between Medtronic and Boston Scientific, both share a similarity when it comes having multiple competitors, nationwide expansions, and advancing in technology by offering fast growing health care products to providers. Also, Boston Scientific has made some good business decisions that will help this merger progress for the next three years and years to come. Boston Scientific, for being well known for the development of the Taxus Stent, has a strong distribution network, a strong brand, great for geographical expansion, and opening new markets.

 Statistics and revenue offer straightforward evidence that the merger of Boston Scientific and Medtronic would be a very lucrative move on both company’s behalf.  Both businesses would have to continue to stay ahead of competition, expand to new markets, remain in compliance with laws and regulations, and continuing to build good relationships with suppliers to beat out their competition.  With constant progression and nationwide business expansions for the companies, this merger would be favorable.  

References

• Bianco, D; Covell, J. (2019). "Boston Scientific Corporation." International Directory of Company Histories. Retrieved October 06, 2019 from Encyclopedia.com: https://www.encyclopedia.com/books/politics-and-business-magazines/boston-scientific-corporation
• https://www.medtronic.com/us-en/about/history.html
• Mikulic, M. (2019, August 9). Medtronic total revenue 2006-2019. Retrieved from https://www.statista.com/statistics/241515/total-revenues-of-medtronic-since-2006/
• Stock Weekly (2019): Medtronic increases 0.5% on weak volume. News Bites US Markets. Retrieved from https://advance-lexis.com libdatab.strayer.edu/api/document? Collection=news&id=urn: contentItem:5X9G-3141-DXKH-N4H3-00000-00&context=1516831
• Team, T. (2019). How Does Boston Scientific's Revenue and Other Key Metrics compare with that of Medtronic? Retrieved from https://www.forbes.com/sites/greatspeculations/2019/12/06/how-does-boston-scientifics-revenue-and-other-key-metrics-compare-with-that-of-medtronic/#410eb21e2ef6