Schein Proceeds with Acquisitions Cautiously

Several years ago, medical, dental, and veterinary supplies cataloger Henry Schein was one of the more active acquirers in the industry. But while the Melville, NY-based marketer recently bought two companies in a three-week period, don’t expect it to maintain that pace throughout the year, says senior vice president of corporate business development Mark Mlotek.

On May 22, Schein agreed to acquire German dental distributor Hager Dental GmbH; on June 2, it agreed to buy surgical glove distributor Colonial Surgical. Disparate though the two acquisitions seem, Mlotek says that, like all of Schein’s previous acquisitions, the companies had the right “pricing, strategy, and culture.” What’s more, they met Schein’s requirement of offering a pretax internal rate of return of 15%-20%, immediately accretive to earnings.

Beyond meeting these key criteria, the two companies fit into Schein’s pattern of acquiring only distributors. “We have no patents, no unique product formulas,” Mlotek stresses. “It’s all about people.”

Mlotek says it should come as no surprise if Schein acquires one or two more companies by the end of the year, but he says acquisition is not vital to Schein’s long-range plans. “We don’t need to do it to thrive,” Mlotek says. “Our company is successful on its own organically, so for us to do an acquisition, it has to make us even better.”

Therefore, don’t expect to see 20 new acquisitions in the near future, nor any acquisitions that would be transformational in nature. “We have a very strong business model in which we will grow a minimum 15% on bottom line in internal growth,” Mlotek says. “For an acquisition to be consummated, it has to be accretive in a lot of different areas. We are disciplined to make sure that happens.”

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