One of the reasons why acquisitions and mergers in the spinal market are complex is because of the great importance of the sales network in the success of those operations. Those of you who do not know this business will probably doubt it. But the reality is that the differentiation between the products of the big companies is currently scarce. It is good salespeople with their close and trusting relationships with customers who make the difference most of the time. It happens in many medical device markets.
In the spine, it is crucial. Having access to the surgeons who decide is not easy. Many surgeons rely on and trust salespeople as part of their team. Therefore, One of the reasons why merging spine companies is difficult is because of their distribution channels. When a merger or acquisition occurs in the spine, one of the main risks is that because of the incertitude, many sales representatives leave the companies. And in many cases, therefore, surgeons can switch from one company’s screw system to another because in most cases, they use products driven by reps.
In the Globus and Nuvasive merger, one of the biggest challenges is to retain the direct and indirect sales networks and align them in their cultures. Being positive, it is true that few projects could be more attractive for a sales representative than carrying a portfolio of spine products that includes Globus and Nuvasive. But sales networks are sensitive to changes that can impact their relationships and service with their customers and collaterally to their incomes.
Therefore, we must not forget, as we have mentioned, that the distribution network is key to maintaining sales of both companies and to being able to keep growing.
If Globus does not want to lose part of its and Nuvasive’s sales and the market share obtained, it should, (and we are sure it will) pay attention to this issue.
Talented sales reps who want more than a pay check may see this as a kick in the pants to start a distributorship with up and coming companies where there is higher commissions. The surgeons might reject the merger and take the lead to look for other relationships. We at KIC Ventures Group already experienced both scenarios. Both companies are weak on total disc replacement and have little focus on ASC which create openings for senior sales reps to pursue elsewhere. Let’s see.
Dr Kingsley R Chin