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Bates White analysis provides support for McKesson's acquisition of PSS World Medical

April 3, 2013

In October 2012, McKesson Corporation (McKesson), a healthcare services and information technology company, announced an agreement to purchase PSS World Medical Inc., a distributor of medical products and services, in a transaction valued at $2.1 billion. Both companies distribute medical and surgical supplies to non-hospital customers, such as nursing homes, physician offices, and home care agencies. The Federal Trade Commission (FTC) reviewed the merger, looking in particular at the possibility of a reduction in competition—either overall, or with respect to specific types of customers—in the distribution of medical and surgical supplies, such as gloves, wound dressing, and catheters.

Peter Thomas of Simpson Thacher & Bartlett LLP, working on behalf of McKesson, hired Northwestern University Professor and Bates White Academic Affiliate David Dranove and a team of Bates White economists, led by Partner Cory Capps and Principal Eric Emch, to evaluate the competitive implications of the merger. After investigating evidence including the industry structure, current and likely future industry participants, customer purchasing patterns, and the market positions of McKesson and PSS World Medical, Prof. Dranove concluded that the proposed merger was unlikely to lead to any anticompetitive effects. In November 2012, Prof. Dranove, Dr. Capps, and Dr. Emch presented a detailed analysis explaining the reasons for that conclusion to FTC staff. 

After McKesson pulled and re-filed its HSR filing, the FTC granted early termination of the waiting period and approved the merger without issuing a second request for additional information to the parties.