Royal Philips ($PHG) has been on the dealmaking circuit since separating out its lighting business last year, scouting out partnerships and hospital contracts to beef up its new consumer healthcare unit. And the company is hungry for more M&A, working with Bank of America to scout out medical device acquisitions to bolster its offerings.
The process is still in its early stages and no specific targets have been mentioned, but Philips would weigh smaller acquisitions and multibillion-euro deals over the next 6 to 12 months, people familiar with the matter told Bloomberg. Bank of America's Merill Lynch unit will provide takeover advice and strategies, helping the company evaluate U.S. and European medical devicemakers specializing in everything from radiotherapy to home care. Philips and Bank of America declined to comment to the news outlet.
While the company is staying mum on how much it can spend on deals, its budget may increase depending on other potential asset disposals, Bloomberg notes. Amsterdam-based Philips said earlier this year that it was planning an initial public offering or sale of its lighting division during the first half of 2016. If all goes to plan, cash from an IPO or sale could give the company more flexibility as it hunts for deals.
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| Philips CEO Frans van Houten |
In the meantime, Philips is working hard to build up its healthcare business, snatching up companies to expand its offerings and striking long-term hospital contracts to grow business. Last year, the devicemaker grabbed Volcano for $1.2 billion to gain ground in catheter-based imaging. In June, the company inked a half-billion-dollar, multi-year contract with WMCHealth--its biggest hospital contract deal to date. Philips will provide its patient monitoring technologies and imaging systems to WMCHealth's 300 partner organizations as part of the agreement, improving healthcare delivery for patients.
And if Philips CEO Frans van Houten has his way, the new deals and hospital contracts will catapult the company to the top of emerging health markets including consumer wellness, diagnostics and minimally invasive surgery.
"I see major opportunities in HealthTech, because of profound trends in healthcare: a rapidly increasing demand for integrated systems, driven by pressures on health systems to shift to value-based business models in relation to rising costs of care due to an aging population and the increasing number of chronic diseases," van Houten told shareholders in May.
At least so far, things seem to be shaping up for the company. Philips Healthcare posted sales of €2.75 billion ($3.05 billion) during Q2, an 8% jump year over year and beating Wall Street's expectations of about 2%. The business' earnings before interest, taxes and amortization were €275 million for the quarter, up from €225 million ($250 million) a year ago.
- read the Bloomberg story
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