Isolde and Emanuel are the heads of two companies in the business of genetic diagnosis. While Isolde’s company Siiquent is focusing hospitals and big diagnosis labs, Emanuel’s company Teomik is targeting research labs and universities. While both companies provide the same excellent customer service free of charge, their revenue models vary in that Siiquent is selling their sequencing machines for competitive prices, but makes money of off the consumables, the biological and chemical compounds, test kits and such. The consumables are sold for a prize below the reimbursement rate the hospital receives from insurance and purchasing from Siiquent thus creates revenue for hospitals.
Teomik on the other hand focuses on research laboratories and established a revenue model that is based on a one-time large investment in the sequencing machine but offers the consumables for competitive prices with small to no margin. The machines however can be high-priced since the research facilities are able to purchase devices for a large sum as they are not depended on reimbursement like the hospitals, the customers of Siiquent.
Arguments for imposing a single revenue model on both companies is that one sales team could be established, saving employees and customer acquisition costs. The perils of imposing a single revenue model on both business units is the danger of losing customers who are bound to certain purchasing processes and criteria. Especially in a hospital setting where regulatory approval and complex reimbursement law is in place, hospitals might choose another provider who fits their purchase requirements. From my experience at a MedTech startup the requirements might even vary from hospital to hospital (e.g., private hospital, university hospital, purchasing groups such as Kaiser Permanente), so there is no one-fits-all revenue model. I believe that Isolde and Emanuel know their customers best and are right in keeping their model flexible.
In a fair merging process, I would give both heads of business units time to talk among each other but also one-on-one with me. I would ask them to explain their strategy and reasoning behind current structures to me and to each other. In a workshop setting, I would let them discuss about which parts of their businesses could and should be combined and which need to be kept separate in the merger process. I would also ask them to come up with an idea on how to best continue generating revenue after merger and how they plan to work together to keep getting their products out to their customers.
