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Transformative industry event?
June 2006
by Chris Anderson  |  Email the author
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Early last month, when Thermo Electron and Fisher Scientific executives convened the conference call to announce what to date is the largest merger of its kind in the life sciences industry, one phrase kept popping up during the call: "industry transforming transaction."
 
Now, as editors, we are accustomed to all manner of hyperbole in the vast ocean of press releases and product announcements that come across our desks or flicker on our computer screens. Don't even get my fellow DDN editor Randy Willis going on phrases like "disruptive technology" or "paradigm shift".
 
Unfortunately, this practice of hard selling editors on the latest and greatest things that aren't so particularly great has a very real, boy-crying-wolf effect to the extent that our skin is hardened and our cynicism sharpened. That's not to say I didn't take an extra big, surprised gulp of coffee early that morning when I saw the title of an e-mail announcing the deal. You'd have to be half dead not to sit up and notice two of the already larger companies in the life sciences industry deciding things would be better for them if they combined. Still, when the phrase "industry transforming transaction" tumbled so effortlessly from the lips of Thermo and Fisher executives, my radar kicked in.
 
But that was then and this is now a few weeks hence and for once, I find that the hype may indeed this time not be hype at all, merely a cold statement of fact.
 
And how could it not be?
 
When combined, the new Thermo Fisher will boast annual revenues of more than $9 billion. It will have more than 7,500 sales folks deployed around the world and a customer list that is 350,000 deep. Think about that. The scale of the business alone, when compared to even the next largest companies in the industry is equally stunning. I mean we're talking a company that is multiple times bigger than its nearest competitors. Nearest competitors, never mind your $50 million to $100 million player that is more typical in this industry.
 
Did I mention that the combined behemoth expects to generate roughly $1 billion in cash flow next year? With that kind of cash lying around, acquisitions of an average life science player will be like you or I popping out to the market for a gallon of milk and a loaf of bread.
 
Transformative? You bet and in multiple ways. Foremost, of course is the creation of the oft-used, and rarely-delivered one-stop shop. Well Thermo Fisher will be all that and will also be looking to increase its presence as not just a supplier of capital equipment and consumables to run your lab, but also as a service provider who can help you run your lab better.
 
The bet Thermo and Fisher are making is that your typical life science lab manager will find it much easier to source all she needs from a single provider with a large and humming distribution network, than to take the time to scour multiple vendors and distributors for the same products—and at perhaps a higher price. Seems like a good bet to me.
 
But this deal, if completed, will also be transformative in the coming years in terms of how competitors view the market and how competitors respond to what could amount to serious pressure on their businesses.
 
While the merger and acquisition pace may have seemed a bit slack over the past year, there can be very little doubt that it will only increase in the coming months as boardroom strategies start to play out as the next tier of companies look to bulk up to keep up.
 
And many of these won't be the typical, garden variety fill-in acquisitions. My bet is that just as it may have been unfathomable for people to think about the possibility of a company named Thermo Fisher Scientific, we are bound to see some very interesting combinations of well-known industry names in the coming years.
 
If your mind is still swimming from this deal, I think you ain't seen nothing yet.

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