What a potential Owens & Minor sale means for suppliers

Carl P. Meyer

By Carl P. Meyer, Executive Vice President, The Wetrich Group

Reuters reported that Owens & Minor Inc is exploring a sale of the company, people familiar with the matter said on Wednesday, as the U.S. medical supplies distributor seeks to recover from a string of disappointing earnings.

With a potential sale of Owens & Minor to another organization an open possibility, what are some of the potential impacts to the Supplier Community?

For Suppliers utilizing O&M to fulfill their orders for mutual provider accounts, this could create significant risk, depending on who were to purchase O&M.

If O&M were purchased by a strategic buyer, and the Supplier’s products compete with Medline, Cardinal or McKesson’s self-manufactured or private label lines, this could create challenges in maintaining the Supplier’s share, as these “Manustributors” logically will promote and sell their proprietary product lines first.

If O&M were purchased by a financial buyer, the market share risk for incumbent O&M suppliers would be less, but there would be a likely possibility that O&M would look to improve the funding from suppliers for services where the suppliers may not be at market rates for payment terms, sales tracing, channel access fees, etc.

On the provider side, an acquisition by a strategic buyer could create some challenges as each of the major Acute Care Med/Surg distributors (Cardinal, Concordance and Medline) have their distinct cultures, and some current O&M customers may not want to work with the acquiring distributor.

This could also create some challenges for Suppliers using O&M’s 3PL services, as they may see changes to service offerings, pricing or Terms & Conditions.

The messaging coming from Richmond seems to be bifurcated, as just Tuesday they announced a new President & CEO (who likely would not have signed on without significant guarantees), only to be followed with this leaked, “we are exploring our options” news story on Wednesday. While this will be interesting to observe, suppliers should be thinking about the potential impact a change of control at O&M could have on their business and how they would respond.