Healthcare Industry Mergers and Acquisitions

This assignment delves into the complex world of mergers and acquisitions (M&As) within the healthcare industry. It requires you to examine various M&A strategies employed by companies, analyze the motivations behind these deals, and assess their impact on stakeholders like patients, employees, and the healthcare system as a whole. The assignment also encourages you to explore relevant case studies and research papers to support your analysis.

Running head: MERGER AND ACQUISITION
Merger and Acquisition
Name of the student
University name
Author’s note

1MERGER AND ACQUISITION
Table of Contents
Introduction......................................................................................................................................2
Background analysis........................................................................................................................4
Goal..................................................................................................................................................5
Analysis of over-the-counter medical industry in Europe...........................................................6
Identification of key market drivers and trends.........................................................................11
SWOT Analysis.............................................................................................................................20
Porter’s Five Force Analysis.........................................................................................................25
Compilation of a long list for potential target companies.............................................................31
Selection of a shortlist for the most suitable target companies and potential Follow up..............32
Recommendations for Human Resource for managing the Merger and Acquisition....................35
References......................................................................................................................................39

2MERGER AND ACQUISITION
Introduction
The current assignment deals with the concept of Merger and Acquisition (M&A) within
the healthcare industry to provide optimal standards of care services to the target population
group. The merger and acquisition have brought about a revolution in current medical standards
and services. The aspect behind the promotion of such a marketing gimmick is to provide
affordable and technologically advanced health care services. With the increasing population,
there is more pressure upon the healthcare resources. However, resource limitation often serves
as a hindrance to the delivery of required standards of healthcare services. In the current
assignment, we have taken into consideration HARTMANN group which is an international
company catering to the fields of medicine and personal hygiene.
The core area that the company had been focussing upon consists of the following such
as disinfection, incontinence management, wound management, risk prevention and personal
healthcare1. The organization has recently planned the launch of some of its range of personal
healthcare products. The proposal was made in order to provide sufficient autonomy and
independence to the ones suffering from long-term disease conditions. The range of personal
health care products launched in this regard would help the users to self-manage their conditions.
The premier products launched by the company such as a glucometer, pulse oximeters can allow
people to self-check or monitor their health condition over a long time. Recently the company
expanded its services to providing smart health care services to the in general population. Some
1Greve, Henrich R., and Cyndi Man Zhang. "Institutional logics and power sources: Merger and
acquisition decisions." Academy of Management Journal 60, no. 2 (2017): 671-694.

3MERGER AND ACQUISITION
of the recent products marketed by the company include self-test kits for alcohol, drugs and
pregnancy.
The company here wishes to expand its range of personal health care products through
inorganic growth channels. Here, the inorganic growth channel could be defined as growing
business, sales by increasing output and business reach by acquiring new businesses by way of
mergers and acquisitions2. In order to reach out to the majority audiences within the current
market, the company has selected four target segments which includes pain management,
musculoskeletal, sleep apnea, elderly and disabled assistive devices. The purpose is to provide
maximum power in the hands of the target patient population.
The assignment had been further supported with the help of sufficient research and
evidence based upon the demand and supply for non –prescription medical devices. The trends
within the current market have also been analysed which helps in expanding upon the merger
acquisition plans. However, a number of hindrances and limitations are faced within such merger
and acquisition activities. The merger and acquisition need a number of financial and legal
obligations to be met before the launch of a fully validated plan within the market. The major
limitation with M&A activities is related to dissemination of adequate share to the different
stakeholders within the merged company. An additional barrier is professed by the lack of
sufficient marketing and promotional channels.
2Brandon-Jones, Alistair, Michael Lewis, Rohit Verma, and Matthew C. Walsman. "Examining
the characteristics and managerial challenges of professional services: An empirical study of
management consultancy in the travel, tourism, and hospitality sector." Journal of Operations
Management 42 (2016): 9-24.

4MERGER AND ACQUISITION
Background analysis
There have been combining views regarding merger and acquisition within the context of
the current health industry. The M&A could be further divided into two varying types which are
full-asset mergers to varying types of affiliation. The merger type chosen is based upon some of
the factors such as size of target customer base and current economic condition of the company3.
The affiliation agreements can include sharing of management services, clinical services and
information technology, risk sharing. The merger and acquisition are often seen as a strategy for
overcoming the market risks associated with the launch of new products. In this respect, the
merger and acquisition strategies are seen as a good way of reaching out to maximum number of
audiences through diverse marketing and promotional channels. A current paradigm within the
medical industry has been brought about where more and more small health care setups are
working together with large hospitals to provide sophisticated healthcare technologies and
interventions for better assessment of individual and community health4. The M&A activities
help in gathering sufficient funds for the promotion of innovative technologies. The
implementation of the M&A activities reduces the hassles of referral within health care and
establishes a centralized pattern of care.
3Moseley III, George B. Managing Health Care Business Strategy. New York: Jones & Bartlett
Learning, 2017: pp.25-30.
4Shi, Zhan Michael, Gene Lee, and Andrew B. Whinston. "Toward a better measure of business
proximity: Topic modeling for industry intelligence." Management Information Systems
Quarterly 40, no. 4 (2016): 1035-1056.

5MERGER AND ACQUISITION
In the current scenario, the HARTMANN group of company wishes to expand its market
reach and share by promoting a range of personal health assessment devices. In this respect, the
company has chosen four target areas such as pain management, sleep apnea, musculoskeletal,
respiratory care devices and elderly disability assistance devices. The rationale behind choosing
such areas for the extension of the marketing plans could be explained with respect to the ageing
population and the need for self-medication. In this respect, one could say that advanced age
increases the tendency of an individual to develop long-term and chronic conditions such as
rheumatoid arthritis, diabetes, etc. Some of these diseases require constant clinical guidance and
monitoring. Thus, with the intervention of personal health monitoring devices, the dependency of
people over physicians and doctors could be reduced5. This further explains the growth in
demand for over the counter non-prescription health assessment and intervention strategies.
Goal
To develop M &A strategy for identifying potential target markets to grow the personal
healthcare business of the company through merger and acquisition
Analysis of over-the-counter medical industry in Europe
There has been a sharp growth in the sale of over the counter non-prescription drugs
within the European market. The non-pharmacy sector has shown considerable increase in their
5Angeli, Federica, and Hans Maarse. "Private capital investments in health care provision
through mergers and acquisitions: from long‐term to acute care." The International journal of
health planning and management 31, no. 4 (2016).

6MERGER AND ACQUISITION
retail market share and has been gradually reaching towards saturation6. As per the current
records and analysis of the German OTC market at least 46 % of the millennial have been seen to
use wearable health devices to track their wellness and fitness quotient. The rest 10 % have been
seen to use such technologies for the management of long-term conditions such as diabetes or
high blood pressure7. The millennial are the first generation users of social media and some of
the additional health apps available nowadays. Therefore, they are pretty comfortable sharing in
sharing their personal information with other online. Therefore, such platforms are often used as
a marketing platform for the emerging M&A enterprises. The HARTMANN group of company
had conducted an online survey regarding the number of people who would actually prefer
traditional and aesthetic mode of health check-up versus technological mode of accessing the
health condition of an individual.
The goal of the HARTMANN group of companies is to empower the patients by making them
able to self-track their health conditions. The wearable devices along with the smart health
assessment tools can help in receiving accurate data on a regular basis8. The monitoring and
assessment on a regular basis also motivate them in keeping a check over some of the activities
6Brueller, Nir N., Abraham Carmeli, and Gideon D. Markman. "Linking merger and acquisition
strategies to postmerger integration: a configurational perspective of human resource
management." Journal of Management (2016): 0149206315626270.
7Mas, Núria, and Giovanni Valentini. "Technology complexity and target selection: the case of
US hospital mergers." Industrial and Corporate Change 24, no. 2 (2014): 511-537.
8Denison, Daniel R., and Ia Ko. "Cultural Due Diligence in Mergers and Acquisitions."
In Advances in Mergers and Acquisitions, pp. 53-72. Emerald Group Publishing Limited, 2016

7MERGER AND ACQUISITION
which could aggravate their present ill health condition. The over the counter non-drug medicinal
assessment tools has a huge ocean of opportunities with respect to the current market. In this
context, some of the factors such increasing health awareness, increased growth of favourable
marketing channels such as social networking sites along with strong brand image can strongly
favour the growth of innovative and measurable healthcare technologies.
The stats for the pharmaceutical market share differentiation shows that over the counter
(OTC) have a market share of 12 % and more. The order channels of the medicine market had
been tracked to see that pharmacy mail order accounts for almost 78 % of the total number of
orders placed9. The growing dependence on technology for daily health assessments of people
could be attributed to a number of causes. Some of these are busy schedules of most of the
people nowadays which leave them with little or no time to visit doctors. Therefore, the hands-on
health assessment tools can be sufficiently productive in reducing the chances of hospital
admissions. On analysis of the market segments, the medical devices claim for almost 44 % of
the present market share. Some of the OTC non-drug medical devices such as orthopaedic
apparatus, disposables, and apparatus for breathing makes up for major quotient of the orders
placed. In this respect, further future analysis shows that by 2035 almost 31 % of the population
will be 65 years or older. The chronic and long-term diseases account for 80 % of the German
9Witt, C.M., Pérard, M., Berman, B., Berman, S., Birdsall, T.C., Defren, H., Kümmel, S., Deng,
G., Dobos, G., Drexler, A. and Holmberg, C., 2015. Using the framework of corporate culture in
“mergers” to support the development of a cultural basis for integrative medicine–guidance for
building an integrative medicine department or service. Patient preference and adherence, 9,
p.113.

8MERGER AND ACQUISITION
health care spending. The German non-pharmaceutical market is supposed to grow by 3 billion
European dollars by 201710.
However, a number of challenges are faced in the marketing and promotion of non-
prescription medical assessment tools. The funding cuts often restrict the propagation of such
tools and interventions within the market. With respect to medical technologies, people are more
prone to use cost-effective intervention plans and health care services. The provision of increased
competition from a number of healthcare channels can also restrict the personal healthcare
marketing plans of the HARTMANN group of companies. However, with the advent of mobile
phones, the ever extending horizon seems to have been limited where each and every individual
wants all the information relative to them available at the single touch of a hand.
In this respect, a PESTLE analysis could be conducted of the current industry for
understanding the effect of the various political, economic, social, technological, legal and
environmental factors which affects the market growth and survival of the emerging business
ideology.
Factors attributes
Political  Reduction of donation to non-pharmaceutical based companies by
government
 Change in taxation laws and policies
Economical  Sudden inflation rate raising the price of the non-drug based medical
10Groves, Peter, Basel Kayyali, David Knott, and Steve Van Kuiken. "The'big data revolution in
healthcare: Accelerating value and innovation." (2016): p25.

9MERGER AND ACQUISITION
services and technologies
 Lower return on investment due to insufficient marketing and
promotion
Social  Increased dependence of people on modern technologies
 Services easily accessible from home or remote locations which the
reduces the waiting time
Technological  The devices are more accurate thus enabling one to record their exact
sugar levels
 The devices are compact, portable and could be carried by one
anywhere
Legal  The merger and acquisition activities require a lot of legal settlements
 The legal disputes often arise with respect to distribution of proper
ratio of shares within the stakeholders
Environmenta
l
 There is increased competition from similar market players
 Negative publicity about high cost and maintenance charges of the
non-drug technical interventions.
Table 1: PESTLE Analysis of non-drug based biomedical companies
(Source: Author)

10MERGER AND ACQUISITION
Figure1: European medical device market11
11Fischer, Shira H., Daniel David, Bradley H. Crotty, Meghan Dierks, and Charles Safran.
"Acceptance and use of health information technology by community-dwelling
elders." International journal of medical informatics 83, no. 9 (2014): 624-635.

11MERGER AND ACQUISITION
Identification of key market drivers and trends
Some of the key market drivers and trends have been analysed over here which promotes
the growth and development of non-drug intervention tools within the current market scenario.
The brands are focussed upon the development of hardware technologies which could be
integrated within the systems and software for improvement of health assessments12. The OTC
brands help in maintaining equity within the target customer segments. The key market drivers
and trends could have been discussed with respect to the following areas of health assessments
such as – pain management devices, musculoskeletal market, respiratory devices market,
diabetes care devices and sleep apnea devices. Another crucial market puller in this regard is the
disabled assistive devices market. The US Pain management market is expected to grow by 1.17
billion by the year 202113. In this respect, a number of pain managing medications are available
in the market. However, the long-term term use of such medicines can have adverse health
outcomes or side effects. Some of the bestselling products in this range are- spinal cord
stimulation devices, transcutaneous electrical nerve stimulation devices. The key driver in this
respect could be high prevalence of diabetes globally resulting in increasing cases of diabetic
neuropathy. Therefore, the advent of such technologies can provide additional support to the
chronically ill patients. Additionally, pain management in end of life care along with occupation
associated pain are other common forms of pain encountered by the people globally. Moreover,
12Rabbitt, Sarah M., Alan E. Kazdin, and Brian Scassellati. "Integrating socially assistive robotics
into mental health care interventions: Applications and recommendations for expanded use."
Clinical psychology review 35 (2015): 35-46
13Trichterborn, Anja, Zu Knyphausen‐Aufseß, and Lars Schweizer. "How to improve acquisition
performance: The role of a dedicated M&A function, M&A learning process, and M&A
capability." Strategic Management Journal 37, no. 4 (2016): 763-773.

12MERGER AND ACQUISITION
such devices could be controlled through synchronized mobile devices which provide sufficient
independence to the patient in the management of their conditions of pain rather than being
dependent on others. The development of nanotechnology has allowed for the development of
user-friendly compact wearable devices.14 Though, such technological interventions are helpful
in accessing the health conditions of the geriatric population, who cannot travel to the local
physician or seldom visit the local clinic; there are limitations with regards to the high pricing
index. Some of the key competitors of the company in this respect are- Boston scientific
corporation, Baxter international, etc.
The global musculoskeletal market has seen a tremendous rise in its size as well as
valuation. The musculoskeletal disorder has been increasing at a drastically high rate. The trends
over here are increased the need for the development of devices that can rebuild the lost bone
and increase the density of the bones. Additionally, developments in cost competitive products
that are easy to administer are some of the other key drivers. The drivers to the implementation
of the project are the benefits offered the state-sponsored employee health insurance plans. The
increased amount of investments made in the cost-effective and innovative technologies are
some of the other drivers. The benefits of the new age innovative technologies are they can
provide remedies for some of the incurable ailments such as psoriatic arthritis. The
musculoskeletal market is expected to grow by $202.9 billion by 2020.
The increase in the rate of global warming and pollution would result in the German
respiratory devices market to grow by 11.97 % from 2015 to 2020. Some of the trends which
could be attributed to the development of the r market for respiratory devices are growing rates
14Risberg, Annette. "Qualitative and longitudinal studies of mergers and acquisitions." The
Abingdon: Routledge Companion to Mergers and Acquisitions (2015): 272.

13MERGER AND ACQUISITION
of ageing population, increased incidents of respiratory issues. This opens the gateway for the
entry of new forms within target market segment by acquisition. Therefore, the HARTMANN
group of companies have chosen the respiratory devices market as one of their target market
segments.
Some of the drivers which have been enlisted by the HARTMANN group of companies
in this regards increase in the rate of disposable income in the developing nations. Additionally,
rising incidents of chronic obstructive pulmonary disease are other key drivers. Some of the
bestselling devices are positive airway pressure devices, oxygen concentrators, nebulizers,
ventilators among the few. However, some of the challenges faced in this regard are lack of
awareness, increased costs associated with the products. Some of the lung infections such as
pneumonia, lung cancer and chronic obstructive pulmonary disease are some of the key drivers
for the high rates of market sales and dependability of people over such products15. The
HARTMANN Company in this regard aims at the development of more economically accessible
health care products. Additionally, the organization also aims at the development of interventions
which could be easily accessed by people of all age groups. The organization also recognizes the
need for skilled labourers and therefore vests a sufficient amount of money in the training and
orientation of its employees.
Definition of a European M&A strategy for PHC
15Huang, I. L., and Y. J. Lin. "The relationship between workplace spirituality and job
involvement under mergers and acquisitions circumstances: the moderating effect of perceived
organizational support." In 17th Conference on Interdisciplinary and Multifungsional Business
Management, pp. 494-507. 2014.

14MERGER AND ACQUISITION
Mergers and Acquisitions (M&A) is an act by which an organisation acquires or purchase
a second organisational body (target). It gives them ownership rights like access to its assets,
stocks, operations products and business line up. In Europe, health care is considered as a non-
profit organisation with a significant social gain, having a dominant effort on the public
ownership in the institutional care.
Need for Merger and Acquisition in the context of Health Care Sector
The uncertainty among the healthcare industry is the driving force behind the M&A.
According of the reports, the drug sales in Europe has drooped along with the increased in the
rate of patent expirations. With an average 46 percent of the top 10 primary health care industry's
revenues are at risk. Intense pressure in the regulatory grounds is building in the domain of
development and approval, pricing of the products and the cost containments. While the big
pharmacy companies have a financial liberty to access big pockets in order to combat these
forces, the smaller firms and the other small biotech sectors face precarious situation under this
financial turmoil. Against this back drop of financial insecurity, the biotech and the
pharmaceutical companies are facilitating the process of mergers and acquisition in order to
bolster their pharmacy pipe line and to uplift their product planning efficiencies16.
16Read @Atkearney: Mergers And Acquisitions In The Healthcare Industry".
2017. Atkearney.Com. https://www.atkearney.com/health/article?/a/mergers-and-acquisitions-in-
the-healthcare-industry.

15MERGER AND ACQUISITION
Figure: Merger and Acquisition Expenditure in Pharma Giants
Source: Mergers and Acquisitions in The Healthcare Industry" 2017
European Framework for Action on Integrated Health Services Delivery (EFFA IHSD)
The European Framework for Action on Integrated Health Services Delivery (EFFA
IHSD) aims to streamline the efforts that are required to accelerate the health care delivery
service. M&A helps in the process of integrated health delivery system. It is an approach of
innovating and implementing sustainable delivery of the primary health care service for the
overall improvement of the health related outcomes17.
Reasons and the Risks of the M&A in the healthcare domain
In the health care industry, the focus of M&A in mainly centralised over the parameters
of acquisitions residing under the intra-industry scenario. Integration can occur as a result of
17 European Framework (EFFA IHSD)". 2017. Euro.Who.Int. http://www.euro.who.int/en/health-
topics/Health-systems/primary-health-care/european-framework-for-action-on-integrated-health-
services-delivery-effa-ihsd.

16MERGER AND ACQUISITION
acquisition of the organisation in the identical state of the service delivery or the product chain
and such M&A is known as horizontal integration. For example, multihospital systems acquiring
some freestanding care facilities hospitals fall under the horizontal integration. One the other
hand, when M&A occurs within the organizations intervening along the service value chain and
product line up then it is known as the vertical integration. M&A is known to uplift the efficacy
of a company via avoiding the duplication tendency of the resource. It also acts via lowering the
cost of the production and thereby helping the overall condition of the service and synergistic
innovation along with ground knowledge transfer. Taxation benefit can also be driven from the
M&A and thereby helping the organisation to reduce their cost burden. The vertical integration
on the other hand helps in the wide spread popularity of the business.
However, M&A in healthcare is also associated with certain level of risk factors. M&A
reduces flexibility of the organisation, increases the organisational difficulties. It also affects
clinical and administrative operations. But M&A can never be looked down upon as it is an
extensive diversification strategy that has helped the health care sectors in Europe to explore and
expand and thereby increasing the quality care18.
Patter of M&A in European Health Care
The pattern of the M&A in the health care sector of Europe seems to be cyclical with a
slight difference in Western Europe. The number of the M&A peaked during the latter half of the
year 2007 with cracking almost 280 deals. Such deals counted to at least 10% to 30% of the
18Asimakopoulos, Ioannis, and Panayiotis P. Athanasoglou. "Revisiting the merger and
acquisition performance of European banks." International review of financial analysis 29
(2013): 237-249.

17MERGER AND ACQUISITION
world's total M&A deals. However, there is a substantial rise in the M&A in European
healthcare, it is important to note that the majority of the phenomenon are of small scale19.
19Angeli, Federica, and Hans Maarse. "Mergers and acquisitions in Western European health
care: Exploring the role of financial services organizations." Health policy 105, no. 2 (2012):
265-272.

18MERGER AND ACQUISITION
Figure: Comparison between the M&A of the European PHC and the rest of the World
(Source: Angeli, Federica and Hans Maarse 2012)

19MERGER AND ACQUISITION
Table: M&A in European Health Care
(Source: Angeli, Federica and Hans Maarse 2012)
Cross-border M&A in UK (Europe)
The financial estimation of Europe and U.S cross border merger and acquisition deals are
more than $171.8 billion. This report is accordance with the reports of Reuters that was
published during the first half of 2017 (May)20. The rate is highest in the century as the countries
residing in the opposite shore of the Atlantic are now in a hunt for the offshore deals in order to
offset their sluggish growth. The major-cross border deal was underscored towards the onset of
the 2017 when the industry giant Kraft Heinz Co (KHC.O) announced a surprise bid of $143
billion for the Unilever (ULVR.L) (UNc.AS). This was done only to withdraw within less than
48 hours. On the other hand, the US healthcare giant, Johnson & Johnson (JNJ.N), clinched the
famous biotech company in Switzerland, Actelion (ATLN.S) in a cash deal of $30 billion. In
February 2017, the Reckiit Benckiser (RB.L) announced a deal in order to extend their interest to
buy baby formula maker Mead Johnson Nutrition (MJN.N). The deal was made for a amount of
$16.6 billion. Thus, providing the British consumer goods company a completely new product
line and thereby stretching its presence in the developing countries where Mead Johnson already
has a strong foot hold.
The M&A of the Hartmann Company must follow the trend of both horizontal and
vertical M&A in order to disseminate their new line of products into the market.
20 Cross-Border M&A Between U.S. And European Firms at 10 Year High". 2017. U.S.
https://www.reuters.com/article/us-europe-usa-deals/cross-border-ma-between-u-s-and-
european-firms-at-10-year-high-idUSKBN18I1M6.

20MERGER AND ACQUISITION
SWOT Analysis
Strength
The main growth driver behind the market growth of the Hartmann is incontinence
management division. Hartmann bestows incontinence hygiene products along with other
medical skin care and patient care products to the professional uses like in the medical clinics,
hospitals, nursing homes and other home care services. This incontinence management segment
has contributed towards more than 32% of the company's total revenue during the financial year
of 201621. This growth has been further aided for the incontinence briefs and incontinence pads.
Examples include Menalindskincare product lineup and Molicare Mobile products lineup.
Moreover, the high sales among along with the profit of operation of the incontinence
management franchise bestowed Hartmann to mark significant investments in the domain of
productivity and value added chain. Apart from their incontinence management of the products,
another strength of Hartmann is their synergy with their existing market trends and the customer
needs. This helped the company to manipulate their product line-up on the basis of the current
rising demand in the market22.
Weakness
The main weakness of the company is, it lags behind the certain crucial areas. Hartmann
is totally dependent on its supply chain management and its group of suppliers. This entire
concept of the supply chain management is complex in the grounds of the Europe. There is a
21 Kretschmer, Theresa. 2015. "The German Consumer Healthcare OTC Market". Gtai.De.
https://www.gtai.de/GTAI/Content/EN/Meta/Events/Invest/2015/Current/C-h/Media/Webinar2-presentation-
theresa-kretschmar.pdf?v=4
22 Menalind® Professional Care". 2017. Hartmann Country. https://www.hartmann.info/en-HK/our
products/Medical-Skin-Care/For-dry,-aged,-irritated-skin/Menalind%C2%AE-professional-care#products

21MERGER AND ACQUISITION
huge negligence in the synergy between the increase in the rate of the suppliers along with the
integration of the organisations that have been acquired by the company and complexicities of
the products plus services across the oceans. Hartmann faces immense problems towards the
successful maintenance of the dedicated supplier and that too in ac acceptable terms. This lack of
dedicated suppliers increases the future manufacturing cost and this casting adverse affects on
the company’s financial grounds. This in the manufacturing cost is increasing the sale-price of
the products and thus the competitors are gaining importance among the consumers via
bestowing them with the relatively low-price products.
Opportunity
At present, the sales of the non-pharmacy channels have increased markedly. For
example, the pain management devices, which are used at-home are gaining popularity due to the
increase in the percentage of the ageing population who seek active life-style and alternative
ways to stay fit. Moreover, insurance companies have cut-back on their coverage plans over pain
management devices. This is due to this reason that the consumers are now increasingly
researching for medical devices for their sole physical needs rather than staying dependent on the
medical practitioner for experts’ guidance23. They are now becoming more proactive in the
choice of their brands. These specific customer’s preferences towards braded health devices have
created great opportunities for the products of Hartman to increase their sales record. Other
change in the customer trends that have created huge opportunity for growth of the Hartmann
AG are increase in the preference towards portable, easy-to-use products which are not only light
in weight but are also user friendly. Few of the portable health devices that fall under the banner
of the Hartmann that have faced increase in the sales record are heat/ice packs and other heating
23 Proprietary Solutions That<Br>Help Protect The Skin<Br>And Improve Quality Of Life". 2017. Hartmann Country.
https://www.hartmann.info/en-US/medical-knowledge/incontinence-management

22MERGER AND ACQUISITION
devices used for muscle cramps. In the grounds of allergy several allergy control drugs are also
gaining popularity among the customers as they are not willing to pay a visit to the doctors for
mere allergic symptoms.
Figure: OTC products benefits in the German Market
(Source: Kretschmer 2015)
Threats
The main threats in the grounds of the Hartmann surplus success in the competitive
market are the federal laws and the regulations. These governmental laws and regulations are
creating barriers for the successful popularity of the products. The transitional laws and the
regulations are mostly framed by the security and the operating standards of the Drug
enforcement administration (DEA), FDA. Apart from FDA there are various other state board of
pharmacy, state health department which, frame the laws on health products like, Department of

23MERGER AND ACQUISITION
Health and Human Services, National Research Council (NRC) and European Union member
states and other governmental authorities24. This restriction imposed over the Hartmann is not
faced by the online vendors and thus leading to their popularity via outnumbering the market
acceptance of Hartmann.
Another threat includes non-compliance of the applicable laws by the company and failure to
maintain and renew the necessary permits and license that has potential to cast an adverse effect
on the overall result of the company's operations and financial threats.
Helpful Harmful
Interna
l
Origin
Strength
 Strong track record along with high
credibility of products (Hartman AG
PHC Products)
 Hartmann has a strong potential to
meet the growing demands of the
large PHC in the terms of logistical
and manufacturing point of view. It
also has high potential of
outsourcing.
 It has a strong ability to synergize
Weakness
 The present spectrum of the
potential products poses certain
limitations on the Hartmann AG.
These limitations are significant
both in the case of the prescription-
free and non-pharmaceutical
products. These at times lead to
non-fulfillment of the customer
needs.
 Difficulty in changing the market
24 German Pharmacies Act". 2017. Abda.De.
https://www.abda.de/fileadmin/assets/Gesetze/Apothekengesetz_engl_Stand-2008-05.pdf.

24MERGER AND ACQUISITION
with the pre-existing market trend
and growth. The synergy is obtained
via licensing products and acquiring
different market sectors.
requirement or problem in coping
up with the changing trends in the
customer choice.
 Limited catalogue of the products
in the OTC-market
 Problem in supply chain
management leading to increase in
the manufacturing cost
Extern
al
Origin
Opportunities
 Huge market potential with huge
number of clients and consumers
 Popularity in the personal health care
products due to increase in the
awareness in the society
 The products of the Hartmann are
recommended by the trusted members
of the health care practitioner in
Germany. This provides solid
foundation that ensures that repeated
sales along with provision for Merger
& Acquisitions towards achieving
new assortments.
Threats
 Increase in the number of
competitors like Hansaplast
Lifespan who have similar business
object behind selling the products
to the consumers with increase in
profit.
 Increase in the popularity of the
online pharmacy market
 Strict federal laws.

25MERGER AND ACQUISITION
Porter’s Five Force Analysis
The main purpose of the porters five force analysis is to provide details about the
competitive environment that exist within an industry. There are 5 parameters that are used
within the framework of porter's analysis that helps to determine the levels of threats that an
organization has to face from each source 25.
Competitive Rivalry
The pharmaceutical industry is believed to be one of the most competitive sector in the
Global market. Most of the pharmaceutical companies in Germany aim to maintain high level of
reputation within the respective sector in order to deal with the Rapid changes that occurs within
the business environment. It is important to mention that due to high level of profit margin that
are usually obtained from the business all the companies are planning in the development of
aggressive competitive strategy.
The merger and acquisition policy is believed to be another major threat for the small
scale companies within the respective sector. As larger companies acquire other firms, they
develop the potential to deal with the dominate over the sector. It can also be said that due to
development in the technology and biological research, it is possible for the pharmaceutical
companies to introduce innovative style of therapy and medicine in the market. Hence, there is
an increase in pressure on Hartmann's to develop on the research and development sector for
introducing new products. The major competitors for Hartmann are spread across different
sectors. The market for pain management device in the Europe is considered to be one of the
25 E. Dobbs, Michael. "Guidelines for applying Porter's five forces framework: a set of industry
analysis templates." Competitiveness Review 24, no. 1 (2014): 32-45.

26MERGER AND ACQUISITION
major part of the pharmaceutical industry. With the total worth value of 0.81 billion dollars, the
sector is expected to grow at a rate of 7.7% within the next 5 years 26. These pain management
devices are mainly used among the sports personals and patients, who are suffering from
physical disabilities. The major competitor in the given sector includes St. Jude Medical Inc,
Pfizer, Baxter international and many more.
Another important sector is that of the musculoskeletal market. With increase in
frequency of total number of patients suffering from musculoskeletal disorders, respective
segment is developing Rapidly. With the increase in the total number of devices that are needed
for Muscular disorders, the level of competition in the respective domain is increasing rapidly.
Major aim of the competitors of Hartmann is to provide cost effective product and that can be
used easily by the all individual patients. By the year 2021, the products needed for the treatment
of bone diseases like Arthritis and osteoporosis are believed to be one of the largest segment of
the pharmaceutical industry in all over Germany. The product scale is likely to increase at the
rate of 8% per year. Hartmann is expecting tough level of competition from the Swiss pharma
company Novartis, which currently has a market share of 5% of the Global market share. The
French company Sanofi is also another major competitor within the given segment. The top 10
Global pharmaceutical companies are currently capturing 30% of the total Pharmaceutical
market at the global scale.
26 Zetterqvist, Anna V., Juan Merlo, and Shai Mulinari. "Complaints, complainants, and rulings
regarding drug promotion in the United Kingdom and Sweden 2004–2012: A quantitative and
qualitative study of pharmaceutical Industry self-regulation." PLoS medicine 12, no. 2 (2015):
e1001785.

27MERGER AND ACQUISITION
The current valuation for respiratory device market in Germany is of current estimated
value of 0.73 billion dollars. The market of Germany is one of the biggest place for
manufacturing of the respiratory devices and is the biggest in all over Europe. Germany currently
captures 20% of the respective sector in the market. The advancement of the technology is
believed to be one of the major driving factor along with the fact that more number of people are
suffering from respiratory disorders due to increase of air pollution 27.
Few of the major competitors in the given sectors, includes that of the B. Barun
Melsungen AG, Bitmos GmbH, Cardinal Health Inc and GE Healthcare. In all over Europe, the
market for respiratory devices are estimated to be worth of 3.90 billion dollars. It is also
important to mention about the fact that with the total number of deaths according due to
respiratory disorder have increased rapidly in the past 5 years. This have provided opportunity to
the development of the respective sector within the European market. Henceforth, all the major
companies within the given sector are applying Effective competitive strategy in order to
increase upon their market share.
For the category of diabetes care the major competitors includes that of Lifescan Inc,
Medtronic plc, Becton Dickinson and Sanofi. The competition with in the market of diabetes
care devices have increased rapidly after publishing of the fact that there are around 8 million
diabetes patient in Germany. As more number of people are getting involved in the awareness
campaign for diabetes, the demand for diabetes care product in the pharmaceutical market is
27 Badora, Karolina, Aleksandra Caban, Cécile Rémuzat, Claude Dussart, and Mondher Toumi.
"Proposed changes to the reimbursement of pharmaceuticals and medical devices in Poland and
their impact on market access and the pharmaceutical industry." Journal of Market Access &
Health Policy 5, no. 1 (2017): 1381544.

28MERGER AND ACQUISITION
increasing rapidly. Major devices within the category that includes glucose monitoring system
and glucometer along with that of the insulin pens.
The major competitors with this sector in investing amount for research and development
of diabetes care devices. This will have even more challenge for the Hartmann as they will have
to invest more amount in order to capture the respective market. In the European and the global
market for diabetes care devices, the major competitors will include that of Abbott Laboratory,
Acon Laboratory, Johnson and Johnson and many more.
The devices for the disease of sleep apnea also shares a significant amount of the
Pharmaceutical market. However, sleeping apnea devices are one of the major contributor for the
development of pharmaceutical industry in the market of Germany. The competitors and major
players within this sector produces oxygen inhaling devices and respiratory polygraph. The two
channel screening devices are also one of the major product within this category28.
The devices needed for the assistance elderly and the disabled individual are also one of
the major players within the segment of the pharmaceutical industry of Germany. The major
level of competition is due to the fact that most of the companies in the market of germany are
implementing the policy of direct sales. This is believed to be one of the effective ways to
improve upon the level of sales within the industry.
Threat from the Supplier
28 David, Bruno, Jean-Luc Wolfender, and Daniel A. Dias. "The pharmaceutical industry and
natural products: historical status and new trends." Phytochemistry Reviews 14, no. 2 (2015):
299-315.

29MERGER AND ACQUISITION
The major function of supplier within the German pharmaceutical industry is to provide
the raw materials that are needed in the manufacturing of the pharmaceutical products. It is
important to mention in the context that there is an advanced supply chain network within the
pharmaceutical industry of Europe29. The Hartmann company, therefore will have the ability to
deal with the issues of shortage of raw materials.
In the recent times, it has been seen that there are various pharmaceutical companies, who
have initiated their business in the supply chain network. This will provide the opportunity to the
company and the ways to improve upon their supply chain. The supply segment also needs to be
effective as it will to improve upon the service quality of the medical centers. The emergency
requirement of the health care centers also needs to be fulfilled that will help to deal with the
emergency requirement of the medical needs.
Threats of alternative products
This threat is mainly encounter due to the fact that with the introduction of the
technology there are many new types of drugs that are being introduced into the market. There
are also the threats of alternative products in the forms of alternative therapies that are used as a
part of the advanced level of modern medicine30. The industry is also facing threats due to the
29 Gassmann, Oliver, Gerrit Reepmeyer, and Maximilian von Zedtwitz. Leading pharmaceutical
innovation: Trends and drivers for growth in the pharmaceutical industry. Springer Science &
Business Media, 2013.
30 DeJong, Colette, Thomas Aguilar, Chien-Wen Tseng, Grace A. Lin, W. John Boscardin, and
R. Adams Dudley. "Pharmaceutical industry–sponsored meals and physician prescribing patterns
for Medicare beneficiaries." JAMA internal medicine 176, no. 8 (2016): 1114-1122.

30MERGER AND ACQUISITION
introduction of the new forms of treatment in the forms of homeopathy and herbal medicines. In
spite of the fact that these traditional and new form of treatment are not accepted scientifically in
many Health Care Centers, the popularity of these treatment techniques are slowly increasing.
This is mainly due to the fact that most of the Pharmaceutical products are not able to deal with
many of the chronic illnesses.
It can also be said that due to the healthy level of diet that are being practiced by many
individual, it is possible to deal with the issues of poor health that occurs due to poor diet and
nutrition deficiency.
Threats from the Buyers
The threat from the buyers is high due to the fact that with increased level of
competitiveness, the customers of the option to switch over to other brand of product.
Nevertheless, due to the patent law of drug, a single company has authority to sell a certain brand
of drug with high pricing31. Brand reputation is also one of the important aspect that help
pharmaceutical company to improve upon their market share. This also effective due to the fact
that most of the companies are implementing effective pricing strategies to gain significant
competitive advantage.
It is also important to mention about the fact that the development of information age, it
is possible for the customers to get detailed information about the various types of composition
and the product quality that are being used for the pharmaceutical products.
31 Jakovljevic, Mihajlo, Marija Lazarevic, Olivera Milovanovic, and Tatjana Kanjevac. "The new
and old Europe: east-west split in pharmaceutical spending." Frontiers in pharmacology 7
(2016).

31MERGER AND ACQUISITION
Compilation of a long list for potential target companies
In order to properly carry out the activity of merger and acquisition, it is essential for the
mother company to properly analyse the competitive environment and all potential companies
within the respective sector. One of the popular ways for dealing with the activity of merger and
acquisition of the large scale companies is by analyzing the business plan of the startups. In case
of the pharmaceutical industry, it is important to consider about the fact that new business firms
are entering the market to make use of the available opportunity. The Hartmann being one of the
major company in the pharmaceutical company in the German Industry.
Currently Hartmann has their business in few of the major categories pharmaceutical
products. These includes business in the category of pain management devices, diabetes care,
sleeping apnea care products and many more. The company needs to analyze their products in
each categories and thereby have the ability to determine the business of each segments.
Pain Management Devices
Few of the major companies have entered their business into the category of pain
management device. The Hartmann can acquire the company of St. Judge medical, which is an
American medical device company. By the acquisition of this company it is possible for
Hartmann to enter into the American pharmaceutical industry and thereby established the name
in the global manufacturer of pain management devices. The DJO Global is also one of the
potentially acquired company. The high level of technological development within the
organization will help the Hartmann company to improve upon the level of innovation and
thereby able to gain competitive advantage.
Musculoskeletal Devices

32MERGER AND ACQUISITION
B. Braun Melsungen AG, Dispomedica GmbH , MAQUET GmbH & Co. KG, Siemens
Medical Solutions and Smiths Medical are few of the major brands that can be acquired for the
category of the pain management of muscles.
Selection of a shortlist for the most suitable target companies and potential Follow up
The shortlist for the most suitable company is done from the list of the competitors, who
has the capability to improve the level of business performance of Hartmann. This is believed to
be one of the effective ways to expand the range of the business. St. Judge medical and B. Braun
Melsungen AG is believed to the two best choice that can be acquired by Hartmann. The main
aim and purpose for the acquisition of the company is due to the fact that these companies will
help in the technological development of the company. Two of the chosen company is believed
to be favourable in the context that the Hartmann Company will improve upon their market share
for the medical devices. The change management process needs to be properly incorporated as a
part of the policy of merger and acquisition policy32. This is believed to help the mother company
to deal with the issues of new financial challenges.
The primary steps that are needed for the merger and acquisition is to collect proper
information about the relevant market. The extensive and relevant data will help the company to
understand the leaders of the market and thereby implement the marketing policies according to
the demand of the customers33. In case of the pharmaceutical and medical products industry, the
32 Yurov, Kirill M., Shane M. Greenstein, Mark T. Shanley, and Richard E. Potter. "The Role of
geographic location in the acquisition strategies of high‐technology firms: Evidence from
computer networking equipment industry." Thunderbird International Business Review 55, no. 4
(2013): 371-385.
33 Cording, Margaret, Jeffrey S. Harrison, Robert E. Hoskisson, and Karsten Jonsen. "Walking
the talk: A multistakeholder exploration of organizational authenticity, employee productivity,

33MERGER AND ACQUISITION
latest trends of the customers are to depend upon the use of the medical devices. The shortlisted
company for Hartmann will help them in the matters of improving their market share within the
segment of medical devices. The client profile of the shortlisted company also needs to be
analysed. This is done due to the fact that after the acquisition of the small scale company, the
mother company has to deal with the risk about the fact that existing customers of the newly
acquired brand can switch over to other alternative products. Hence, it is important from the
perspective of the mother company to maintain and if possible to improve upon the quality of the
existing products.
Hence, it is highly essential to deal with the issues of financial information of the newly
acquired brand. This is believed to be one of the effective ways to ensure that all types of
financial transaction process that is a part of the acquisition activity is essential. The target
company also needs to identify the potential target customers and also perform activity related
with that of the financial assessment and understand the estimation of the overall cost and along
with the revenue values of the company. The financial transaction will be done based upon the
asset value of the acquired company34. The valuation of the asset is done based upon the
parameters like cash flow analysis and public trade value. It is also important to understand the
share value of the respective company under the current scenario in trade market. In many cases,
and post-merger performance." The Academy of Management Perspectives 28, no. 1 (2014): 38-
56.
34 Greve, Henrich R., and Cyndi Man Zhang. "Institutional logics and power sources: Merger and
acquisition decisions." Academy of Management Journal 60, no. 2 (2017): 671-694.

34MERGER AND ACQUISITION
the share value of the acquired company falls significantly as the mother company is not able
maintain the effective strategies35.
One of the major issue of the management of the mother company is to combine the
business strategy of and implement an overall new and unique style of strategy that can be
applied within the existing business scenario. In case of Hartmann, the management needs to
ensure that most of the old and senior employees of the acquired brand are taken proper
consultation before implementation of the new strategy36. The newly implemented operational
changes needs to ensure that interest of every groups of stakeholders are not compromised. The
human resource department of the acquired and the mother company also need to perform
effectively that will ensure that all types of human resource are being used properly.
The mother company also needs to focus upon improving the values of share and the
market reputation of the acquired company. This is also one of the ways that are implicated to
deal with the issues related with that of the poor level of management and control during the
process of change management37.
35 Dunlap, Denise, Edward F. McDonough, Ram Mudambi, and Tim Swift. "Making Up Is Hard
to Do: Knowledge Acquisition Strategies and the Nature of New Product Innovation." Journal of
Product Innovation Management 33, no. 4 (2016): 472-491.
36 Brueller, Nir N., Abraham Carmeli, and Gideon D. Markman. "Linking merger and acquisition
strategies to postmerger integration: a configurational perspective of human resource
management." Journal of Management (2016): 0149206315626270.
37 Park, Hyunseok, Janghyeok Yoon, and Kwangsoo Kim. "Identification and evaluation of
corporations for merger and acquisition strategies using patent information and text mining."
Scientometrics 97, no. 3 (2013): 883-909.

35MERGER AND ACQUISITION
Recommendations for Human Resource for managing the Merger and Acquisition
One of the important requirement for merger and acquisition activities is to bring about
organizational change which is necessary in fulfilling organizational objectives at various levels.
The tools of merger and acquisition activities is regarded to have a significant effect upon the
existing workers of the acquiring company. It is clear that in most of the cases merger and
acquisition activities fails due to for implementation of new organizational structure in the
Human Resource Department38. It is essential for the HR department to implement new and
effective policy, which is required in the purpose of adopting the change. The primary activity of
HR department includes creation and implementation of new policy. The initial name of the HR
department has to retain all the old employees of acquiring and acquired company. Proper
employee selection and downsizing will also be carried out, which will help in the process of
managing the changes in the workplace.
During the initial stage of merger and acquisition activity, both the parent and acquired
company, has to deal with uncertain business condition. It is important from the perspective of
the organization, to provide proper information to the Employees regarding the change in the
organizational structure. It is important for the HR department to collect proper data that are
needed in the implementation of the organizational strategy. The integration of work culture of
both parent and acquired company is considered to be one of the major Challenge for the HR
department. It is also important to mention that the HR department can face challenge in
maintaining status quo. Communication is considered to be one of the major activity that are
38 Marks, Mitchell Lee, and Philip H. Mirvis. "Managing the precombination phase of mergers
and acquisitions." In Advances in Mergers and Acquisitions, pp. 1-15. Emerald Group Publishing
Limited, 2015.

36MERGER AND ACQUISITION
needed to deal with the resistance that is one of the major part of merger and acquisition policy.
There is high level of ethical dilemmas that are often encountered by the HR department39.
Most of the transaction activities involved within the HR activities include identification
of new group of customers that will be included within the target group of the company. The
financial transaction activity between the acquired and Parent company need to executed with
the help of proper non-disclosure agreement40. This will help to maintain the privacy of the
business interaction. After completion of the acquisition activity, it is important for the parent
company to intensify the interest of the buyers, by implementing new Strategies to improve and
innovate product quality. It is important for both the company to carry out all financial
transaction with the help of legal contract. This will help to ensure that there is no unethical
policy that are being implemented41.
The Hartmann, need to include new policy in order to improve and expand the range of
Pharmaceutical products. Before implementation of the new product group within the market,
under the brand name of the company, it is essential for the quality management team to conduct
proper quality check. This will help to ensure that quality of the product of the mother company
is being maintained. Shifting of the intellectual property is also one of the essential part the
39 Cartwright, Sue, and Cary L. Cooper. Mergers and acquisitions: The human factor.
Butterworth-Heinemann, 2014.
40 Marks, Mitchell Lee, and Philip H. Mirvis. "Managing the precombination phase of mergers
and acquisitions." In Advances in Mergers and Acquisitions, pp. 1-15. Emerald Group Publishing
Limited, 2015.
41 Purce, John. "The impact of corporate strategy on human resource management." New
Perspectives on Human Resource Management (Routledge Revivals) 67 (2014).

37MERGER AND ACQUISITION
merger and acquisition activity. The acquired company need to proper amount in order to deal
with the merger and acquisition activities42.
After merger and acquisition activities are being completed, it is useful for the buyer to
expect high level of activity as strategic fit buyer. Hence, it is essential for the parent company,
to include new types of product in the market.
42 Brueller, Nir N., Abraham Carmeli, and Gideon D. Markman. "Linking merger and acquisition
strategies to postmerger integration: a configurational perspective of human resource
management." Journal of Management (2016): 0149206315626270.

38MERGER AND ACQUISITION
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