Name that merger

March 27, 2009

With stock prices at lows not seen in a decade, the imaging industry is primed for a wave of mergers and acquisitions. That it hasn’t arrived yet is due mostly to liquidity problems, which will ease in the next six months or year. The only question then will be what the industry will look like when this wave washes over it. I’m betting it will look eerily similar to what it is today.

With stock prices at lows not seen in a decade, the imaging industry is primed for a wave of mergers and acquisitions. That it hasn't arrived yet is due mostly to liquidity problems, which will ease in the next six months or year. The only question then will be what the industry will look like when this wave washes over it. I'm betting it will look eerily similar to what it is today.

In the radiology industry, companies have consolidated under the most recognizable names and dispensed with the others, even when billions of dollars were involved. In 2003, when GE Medical Systems purchased the pharmaceutical company Nycomed Amersham for $9.3 billion, the merged company became known simply as GE Healthcare. The change reflected the broader agenda of the newly created company, a move from medical systems to healthcare. But it kept the kernel of its recognition: GE. Interestingly, the parent company is known simply as "GE." So it is that as the company gets bigger, the name gets smaller and simpler.

When Hologic a decade ago bought the mammography company Lorad and radiography firm Bennett X-Ray, the merged company became known simply as Hologic. The two acquisitions were each substantially smaller than the parent, which may have figured into the name decision. But last year Hologic merged with Cytyc, a company significantly larger than itself. With a book value of about $4 billion, Hologic paid more than $6 billion to buy Cytyc. They again chose a single name: Hologic.

Keeping it simple is the reason Sears, Roebuck became Sears. But although simplicity is important, the new name must reflect a company's past, if the past is worth keeping. When Siemens paid $700 million for ultrasound vendor Acuson, the German giant was not known for high-performance ultrasound. Therefore, Siemens needed not only the Acuson portfolio, but the Acuson name. It did so not by changing its corporate name but by keeping the product names. To this day, nine years after the merger, the company continues to brand its ultrasound products with the Acuson name, yet keeps its corporate name as Siemens. The same goes for Hologic, which continues to use brand names popularized by Cytyc, but kept its corporate name the same, adopting the slogan: "Cytyc and Hologic Together -- Sharing One Name, One Vision."

And this is a point too easily overlooked. The names of newly merged companies should be expressions of the reason the companies came together. Here's how Hologic and Cytyc explain the decision on the Cytyc website:

"Cytyc and Hologic have combined together under the Hologic name with a shared commitment to enhance women's health through earlier and better detection, improved diagnosis, less invasive treatments and improved patient outcomes… Please join us in celebrating our expanded vision."

Simplicity and name recognition succeed best in the context of a shared mission and vision. In the year or so ahead, we'll see how well our industry responds to this challenge. At the very least, there will be fewer names.