CINCINNATI – When Dr. Edward Goldman heard the Procter &Gamble Co. had called, he immediately suspected it was a prank.
“We thought somebody was actually playing a joke,” said Goldman, who couldn’t guess what the giant consumer products company would want from his primary medical care business in Boca Raton, Fla. One of his colleagues had recently talked about P&G, praising the company as “the Harvard of marketing,” so he figured someone was playing off that discussion.
It was no joke.
The phone call began a relationship that led to P&G’s recently announced acquisition of a stake in MDVIP Inc., a company Goldman helped start six years ago, in which physicians keep practices small and focus on preventive care for fee-paying patients. The deal, its terms undisclosed, is one in a series of little-noticed investments Procter &Gamble has made in the aftermath of its blockbuster $57 billion purchase of Gillette Co. in 2005, and the company says it’s now focusing on smaller acquisitions.
While mergers such as P&G-Gillette or AT&T Inc.’s $86 billion buyout of BellSouth in December capture the headlines, large companies have also been busy with comparatively small deals. Companies such as P&G can expand business quickly that way by throwing their marketing muscle and infrastructure behind products that are already developed but are in their early stages.
Coca-Cola Co. this month bought Fuze Beverage LLC for an undisclosed amount, extending the world’s largest beverage maker’s line of drinks with Fuze juice and tea brands. Johnson &Johnson Co. has also been active, obtaining cardiac stent maker Conor Medsystems Inc. and the consumer health products business of Pfizer Inc. in recent months.
“The rationale is from little seedlings grow big oak trees,” A.G. Lafley, P&G’s chief executive, told analysts last month, explaining that his company likes such deals “because it gives us time to learn; it gets us in early in the formation of the new category or segment.”
Michael Docherty, chief executive of Venture2, which consults for and supports innovative entrepreneurs, said acquiring or partnering with smaller companies can be a quick way to add growth potential for big companies.
“They could have identified the same business opportunity and said, ‘Let’s do this ourselves,’” Docherty said. “It’s this notion of open innovation.”
“We’ve had a clarion call to find innovation wherever we can,” said Nathan Estruth, general manager for P&G’s new business division. “As part of that, we’re always looking for companies that have interesting business models or brands.”
In the case of MDVIP, P&G wanted to learn more about patients willing to pay up to $1,800 a year for personalized care that operates on a premise that close attention to wellness and prevention results in better health and lower medical costs in the long run.
MDVIP agreed about a year ago to give P&G access to the patients if P&G would share its research. From there, P&G decided to buy minority ownership of the privately held company.
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