Medical Equipment Supply in Switzerland – Building a Value-Added Distributor via Buy & Build Strategy
Switzerland has long been recognised for its quality healthcare system, supported by cutting-edge medical research and superior medical facilities. For businesses operating in the healthcare market, particularly in the medical equipment supply segment, the country offers an environment rife with opportunities.
One strategy that has gained prominence is the Buy & Build strategy—acquiring smaller companies in similar sectors and merging them to create a value-added distributor. This post aims to shed light on how our strategy is aimed to change the Swiss medical equipment supply landscape.
Critical Aspects and Macro Environment of Medical Equipment Supply in Switzerland
Megatrend: Increasing Life Expectancy
Switzerland’s population is aging at a significant rate, positioning it as one of the oldest nations in Europe. A rise of approximately 170,000 citizens aged 65 and above between 2008 and 2020, accounting for about 2% of the total population, underlines the gravity of this demographic shift. This inevitably fuels an elevated demand for healthcare services, including specialised treatment for chronic conditions that often necessitate advanced medical equipment.
Strategic Opportunity:
This escalating need for healthcare services provides an auspicious climate for medical equipment distributors. A Buy & Build strategy is particularly well-suited for swiftly penetrating this burgeoning market, allowing businesses to offer a diversified range of products that cater to the specific needs of an older population.
Hospitals as Key Healthcare Expenditure Stakeholders
Hospitals are the cornerstone of healthcare spending in Switzerland, constituting 36.7% of the country’s total healthcare budget. Notably, nearly 27% of all third-party expenditures by hospitals are directed towards equipment and service providers.
Emphasis on Quality: A Boon for Local Swiss Suppliers and SMEs
Switzerland’s healthcare system places an unambiguous emphasis on quality over cost-effectiveness. This orientation offers an invaluable competitive edge for local suppliers and Small and Medium Enterprises (SMEs), enabling them to focus on delivering premium products without price constraints. Furthermore, Switzerland’s absence from free trade union agreements with the EU establishes formidable barriers to entry for foreign competitors.
Strategic Advantage:
The prioritization of quality, coupled with the trade barriers, function as protective moats around local enterprises, enhancing their prospects in the domestic market.
World-Leading R&D and Innovation Ecosystem
Switzerland is home to some of the world’s most renowned pharmaceutical and medical research institutions. The country’s dedication to innovation offers the medical equipment sector a unique ecosystem for developing cutting-edge products and solutions.
Strategic Opportunity:
Companies with a focus on technological advancement can find ample collaboration opportunities for R&D, thereby staying ahead of the market curve and offering high-value products that meet the rigorous Swiss standards for quality.
Strong Regulatory Framework Ensuring Safety and Quality
Switzerland boasts a robust regulatory framework that underscores safety and quality in healthcare. While stringent, these regulations build consumer trust and raise the overall standard of medical equipment and healthcare services.
Strategic Advantage:
For businesses that can navigate the regulatory landscape, this presents an opportunity to build strong brand equity and consumer trust, serving as a competitive advantage in a market that highly values quality and safety.
The Swiss medical equipment market presents a rich tapestry of opportunities, driven by factors like the aging population, substantial hospital spending, and a focus on quality healthcare. Additional layers of attractiveness come from the country’s innovative R&D environment and stringent, trust-building regulations. Together, these aspects create a fertile ground for employing a Buy & Build strategy, offering promising prospects for enterprises willing to navigate and leverage these complex, yet rewarding, market dynamics.
Key Success Drivers for the Buy & Build in the Swiss Medical Equipment Market
When embarking on a Buy & Build strategy in the Swiss medical equipment supply sector, understanding the essential drivers for success can significantly increase the odds of realising the full potential of your acquisitions. Below are five pivotal factors that should not be overlooked.
Establish a Highly Recurring Revenue Business
- Long-term Customer Engagement: The aim should be to capture customers along the entire recurring value-chain steps—right from the initial purchase to ongoing services like maintenance, upgrades and subscriptions.
- Enhanced Customer Experience: Offering a comprehensive range of services and creating a value-added wholesale experience can significantly enhance customer retention and loyalty.
Implication for Buy & Build:
A business model that encourages recurring revenue makes each acquisition more valuable, ensuring a steady income stream while reducing customer churn.
Synergies in Logistics, Costs, Nonconcurrent Clients and Upsell Potential
- Logistic Hubs: Build on the existing warehouses to create centralised logistic hubs that can serve multiple acquisitions.
- Cost Reduction: By consolidating management teams into a united headquarters, rental and operational costs can be dramatically reduced.
- Client Base Expansion: Acquisitions often bring in nonconcurrent clients, offering opportunities to upsell products.
Implication for Buy & Build:
Identifying and leveraging synergies can quickly accelerate the EBITDA, making the entire Buy & Build strategy more lucrative.
Focus on High-Margin Services and Products
- Specialisation and Expertise: Capture high-margin, value-added aspects of the core business—like rent, sanitization, installation—through specialization or deep product knowledge.
- Target Market: Focus on high-margin customer segments, such as large hospitals and private practices, which are willing to pay a premium for quality.
Implication for Buy & Build:
Focusing on high-margin products and services can significantly boost profitability, making the Buy & Build strategy not just viable but highly lucrative.
Develop an Asset-Light Business Model
- Cash Flow: A focus on businesses that require minimal R&D investment can result in strong cash-flow generation.
- Scalability: Value-added services can be easily scaled across Switzerland without significant investments in new infrastructure.
Implication for Buy & Build:
An asset-light model ensures that the business remains agile and scalable, allowing for quick adjustments to market changes or new acquisition opportunities.
Long-term Protected Business Model
- Industry Resilience: Medical equipment is an essential industry with low demand elasticity, making it relatively recession-proof.
- Barriers to Entry: Deep product expertise, CH-Rep credentials and required customer proximity create substantial barriers to entry for new or disruptive players.
Implication for Buy & Build:
A protected business model ensures long-term stability, safeguarding the investments made in the acquisitions and supporting the overall strategy’s sustainability.