Romance fills the air

Merger fever has again gripped the imaging community. The megamergers, like the Philips and Marconi union, are done. The big vendors are now looking for small fry to fill their needs. And there are plenty of small and medium fry around.

Over the last few weeks, vendors have made bids for or completed the purchase of about a half-dozen companies. A billion dollars here (the Siemens/CTI deal), a hundred million there (the McKesson/Medcon merger). It all adds up.

Seeing deals emerge over and over made me wonder about some of the phrases that keep cropping up. The one we always take for granted is "due diligence." What exactly is due diligence? It almost seems like a contradiction in terms, considering that many of the executives I ask about their plans after the merger is complete tell me they really are only beginning to form them. You'd think those plans would already be hatched. But they can't be.

Companies keep their cards pretty close to the vest when they're making deals. If the deal falls through, those two companies will very probably be scrapping with each other for customers again in a few weeks.

So how can they know whether the deal they want is the one they're making? A lot of it just comes from being in the market space and seeing what's going on.

Many times the romance starts with an alliance. A company enters into a supply agreement, under which the company they are courting provides a technology. Algotec supplied Kodak's DirectView System 5 until Kodak purchased the company early last year.

When the relationship doesn't work out, the company in search of a mate goes looking elsewhere. McKesson signed an agreement with Camtronics last November to resell Camtronics' cardiology PACS. A few days ago, McKesson announced a bid to purchase Medcon, a provider of cardiology IT products.

Sometimes matches are made unexpectedly. Mercury Computer, for example, wants to buy the German IT firm Sohard. Early in this relationship, which began late last year, Mercury was the supplier. Sohard wanted accelerator technology for its PACS product. Mercury, it turns out, liked the German company's PACS. And it was done.

Lately, it's seemed that companies are leaping at each other at an almost frantic pace. A few months and they're hitched. But not all are so quick to jump. Siemens worked with CTI Molecular Imaging for 18 years before tying the knot in May. For much of that time, alliances and supply arrangements were enough. But recent market conditions changed that. Increased competition and the need to control technological development can turn everything around.

The surge in mergers, seen particularly in PACS and IT, reflects those conditions. What's going on now is only the beginning. Many more unions are likely poised in the wings. But which companies will join up is hard to say, even for the companies doing the joining.