por Thomas Dworetzky
, Contributing Reporter | June 13, 2016
Fresh on the heels of its lighting business spinoff, Dutch health care equipment maker, Royal Philips, is on the prowl for new billion-dollar-plus acquisitions.
Although specific targets of opportunity have not been announced, the field of health care information — both technology and data — is a potential area of interest, Frans van Houten, CEO of Philips, told Bloomberg recently.
“It has not escaped us that other competitors have also identified health as an attractive marketplace,” Van Houten told the news agency. “Clearly there’s no room for complacency. I continue to be the guy who has a lot of fire in the belly to make sure that we continue to move.”
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Size matters, too. The typical target deal could be on the scale of the company's 2014 $1.2 billion takeover of smart-catheter maker Volcano Corp., he noted. But smaller deals cannot be ruled out, he added.
Health care looms large at Philips — it was responsible for 45 percent of last year's revenue. And with just about everyone in the technology sector stepping into the medical space as it rapidly evolves, this is certainly not the year for complacency.
Competitors include Medtronic Plc, but also new players like Alphabet and Apple, which just adds to the pressure to grow in order to dominate in the newly integrating connected hospital and health care space.
This connected health care trend is the key to the company's growth. Pieter Nota, head of Philips’ personal health unit, noted in a recent conference call, stating, “It is already existing today and it will start to play a major role in the course of the coming years.”
Acquisitions will be a necessary part of the path forward, Marcel Achterberg, an analyst at Bank Degroof Petercam in Amsterdam, told Bloomberg, as “the underlying growth in health care isn’t that great.”
Lucky for Philips, then, that the company now has the money to cut the Volcano acquisition debt and also to start looking for new companies to buy, according to van Houten.
“Over time we’ll bring the rest of Lighting to the market,” he told the news agency. “That means that there’s going to be multiple moments of cash inflow. As we then continue to improve our performance, we also generate the cash streams to pursue even more acquisitions.”
Another plus for Royal Philips is its innovation-friendly corporate culture. “They are not tightly bound by the historical conventions of traditional health care providers, the risk aversion to innovation — their culture isn’t like that,” Karen Taylor, research director for Deloitte U.K. Centre for Health Solutions, explained to the news service.