Del continues to enlarge its business through acquisitions, OEM alliances

February 2, 2000

When it agreed last month to acquire a majority stake in Italian radiographic/fluoroscopic firm Villa Sistemi Medicali, x-ray manufacturer Del Global Technologies moved closer to its goal of becoming a worldwide supplier of low-cost imaging systems. In a

When it agreed last month to acquire a majority stake in Italian radiographic/fluoroscopic firm Villa Sistemi Medicali, x-ray manufacturer Del Global Technologies moved closer to its goal of becoming a worldwide supplier of low-cost imaging systems. In a two-step transaction, the company bought an initial 19% stake in Villa and secured an exclusive option to increase its ownership interest to 80% of Villa’s capital stock (SCAN 1/19/00). Del expects the acquisition to close by May.

In addition to its R/F offerings, Milan-based Villa Sistemi has a line of portable units with power ratings from 5kW to 30kW, and a line of dental imaging systems, including intra-oral and panoramic units. It has annual sales of approximately $20 million, 25% of which are in Italy, a market in which Del has had minimal influence. Del plans to keep Villa’s management team and name intact. The Valhalla, NY, company will consolidate two adjacent Villa facilities, but will make no other facility changes.

In addition to rounding out Del’s product line, the purchase boosts Del’s medical systems sales and supports its strategy of moving into world markets, particularly in Europe.

“Getting into Europe is one of our key strategies, and has been for about five years,” said Leonard Trugman, president and CEO. “And with (the Villa acquisition), our total medical business, including sales of systems and subsystems, will represent 90% of our sales, rather than 80% before the acquisition.”

Del’s business focus has shifted dramatically since the early 1990s, when the firm made the decision to transform the company’s product line from primarily defense electronics to medical imaging. Del receives 65% of its revenues from complete systems, 25% from subsystems, and 10% from power conversion and noise suppression units sold into nonmedical industries. For fiscal year 1999, the company reported revenues of $68 million, up 9% from the previous year’s $62 million. Del’s net income for 1999 climbed 15%, from 1998’s $5.8 million to $6.7 million.

One way Del has been actively seeking to expand its business is through acquisition of companies that offer niche technologies it lacks, according to Trugman. In 1992, Del purchased x-ray and mammography firm DynaRad, and in 1996, bought Gendex Medical from Dentsply International. Two years later, Del acquired Acoma Medical Imaging for $1.4 million over three years (SCAN 2/17/99). Each purchase has broadened Del’s line of low-cost imaging products.

The company continues to seek an entrée into other markets, such as ultrasound, another modality that provides low-cost imaging, and digital radiography. On the x-ray side, Del is involved with several early-stage projects, choosing to join with other manufacturers to add digital detectors to its systems, rather than developing the technology on its own.

Del’s expansion strategy also includes further development of OEM partnerships, for which the firm sees a strong potential market. Although it declined to name the specific manufacturers with which it has relationships, the company emphasized that it has continued to cultivate OEM alliances, which has resulted in a shift in its distribution channels. Approximately 65% of its sales of complete medical systems are through end-user sales, and 35% are through OEMs; last year, the mix was 80%/20%.

“Within the medical imaging market, there is tremendous momentum gathering as mega-companies look for good niche companies that can handle proprietary systems and subsystems work,” Trugman said. “We’re very cost-effective (for OEMs), and we don’t just do manufacturing, but we also design and develop units. OEM partnerships fit with a market that’s increasingly concerned with cost-compression, cost-effectiveness.”