On January 26, 2015, Medtronic announced that they would be acquiring Covidien. Medtronic (MDT) is a company headquartered in Minneapolis, MN and Dublin, Ireland. Medtronic is known for being a global leader in medical technology, services, and solutions. Covidien, another company centered in Dublin, is known for their production of medical devices and supplies. Medtronic’s CEO, Omar Ishrak was quoted saying: “We can now bring together the extensive and innovative capabilities of both Medtronic and Covidien with an underlying objective to solve healthcare’s biggest challenge – expanding access and improving clinical outcomes, while lowering costs.”
This is an important issue when it comes to supply chain integration because it is integrating two supply chains into one. Medtronic has a broad demographic of global clients and 85,000 employees in 160 countries. Integration of supply chain is a crucial part of business because, as a medical company, you need to have a huge connection with many hospitals global as well as ensuring the medical device arrive on time to the right place.
The first problem that can occur in regard to supply chain in acquisitions is combine to customer networks together. Being that both companies are in the medical field, Medtronic already has a significant experience in this field. With this being said issues can still arise.
The next issue that should be highlighted is supplier relations. If the two companies have different suppliers which do they continue to work with or do they continue to work with both considering the two companies are in the same field of business. Additionally, the level of supply chain visibility can be a considerable factor in acquisitions. This is due to the fact that if the acquirer, Medtronic, maintains a high level of visibility and Covidien, acquiree, does not then establishing this level of visibility can be costly and time consuming regardless of the level of benefit gained.
The final issue that should be assessed is the logistical nightmare of combining two companies. Logistics is the how effectively business operate in day to day operations from supplier to warehouse to customer. When acquiring a company, the key question is do you continue to allow the acquired company to operate as is or to integrate them fully into the parent company. If you choose to fully integrate many costs will arise. The main cost is the money and time it would take to reeducate all employees from the lowest level, like the floor workers at the warehouse/manufacturing plant, to executives.
To this date Medtronic’s acquisition of Covidien has been stable. Both company are reaping the benefit of an acquisition and their stock prices are trending upward.