The merger of the market leader and its key competitor was fraught with risk. But careful management has made a bigger, better dental products business.
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Entrepreneur: Gordon Anderson, Vice-President
Company: Henry Schein Halas
Business type: Importers, marketers and distributors of dental supplies and equipment
Founded: Henry Schein Regional established in Australia in 1998; Halas established in Australia in 1950; Regional Dental established 30 years ago by two Australian entrepreneurs: Bernie and Maurie Stang
Employees: 369
Turnover: (2004 - 2005) More than $100M
Head office: Sydney, NSW; offices in: Melbourne, Brisbane, Adelaide, Perth
Contact details: +61 2 9697 6288
The Henry Schein Halas Story
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Key learning points:
- Merger preparations - Speak to all employees and allay their fears. Talk to clients and explain how the merger will benefit them too.
- Post-merger - Be prepared for some degree of cultural kickback. Some people will always be uncomfortable with change.
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Merging two company cultures is a challenge for any business. But when the companies are a market leader and its key competitor, the challenge is even greater - especially if “no redundancies” is a merger condition. Gordon Anderson, vice-president of Henry Schein Halas, says: “We approached this not as an acquisition but as an opportunity to expand the business.”
United States-based Henry Schein is the world’s largest dental supplies retailer. In 1998, Henry Schein entered into a joint venture in Australia with Bernie and Maurie Stang of Regional Health, becoming Henry Schein Regional. In May 2005, Henry Schein Regional acquired Halas from Australian Pharmaceutical Industries (API), bringing the businesses together as Henry Schein Halas.
Henry Schein Halas services the dental market in Australia. There are three main divisions: equipment, consumables and laboratories. During the merger, Henry Schein Halas also established a new division to represent niche products such as Oral B. The new division retains the Regional Dental name.
The Challenge
To merge two company cultures.
The Solution
To minimize fear and anxiety among staff, Halas’s general manager, Andrew Hoggart, and Anderson spoke to each employee before the integration, reframing the merger as a business expansion that would offer more opportunities - and no forced redundancies. A vision conference was held for the sales representatives and warehouse staff began working together as stock came in. The preparations were successful: only about four staff - just 1% of all employees - took voluntary redundancy packages rather than move to the organisation’s new premises.
Halas was 20% larger than Henry Schein Regional and there was some duplication of roles. About 40% of the combined staff of 370 were in sales roles. To get closer to customers, sales representatives’ territories were reduced from 200 customers to 110 customers. Anderson says: “We made a philosophical change and decided to give our reps more time to manage their territories even better.”
Remuneration systems also needed adjustment. Henry Schein Regional staff were on a high base; Halas staff were on a higher commission structure. By March 2006, all sales staff were on the same pay structure. Anderson says: “We went for something in between the two. We have also given staff a salary guarantee for a year.”
Not all staff were comfortable with the changes. Anderson says it takes time to adjust to working in a new office, under a new reporting structure and a new operating platform. An unknown employee sent poison pen letters: many staff received a list of negative events that would supposedly happen after the sale. Anderson says: “It didn’t help but we’ve moved on. None of those claims were true.”
When two competitors merge, there will inevitably be some internal competition between products. To assuage any agency fears, Henry Schein Halas appointed internal product managers who are the link between the supplier and the sales team. Anderson says: “We approached our partners and explained that we have doubled their sales force and appointed a product manager to deal with internal competitors.”
The Result
The merger of Halas and Henry Schein Regional has confirmed the business as the market leader in the dental services market. Customers of the combined venture now have more products to choose from and improved sales and service. Integration costs are still being tallied, however revenue has surged by 5–10%, according to Anderson. “This is a direct result of sales people getting the combined business of 110 dentists instead of the split business of 200.” The top 30 agencies represented by Henry Schein Regional and Halas were approached and the effect of the merger discussed. Only one agency chose to leave.
Henry Schein is a Fortune 500 company and the rigorous reporting systems used in the United States parent company are being introduced to Henry Schein Halas. Henry Schein was recently named ‘Most Admired in Its Industry’ in Fortune magazine’s 2006 list of the most admired companies in the US.