Midwest and More

Edition: April 2002 - Vol 10 Number 04
Article#: 1208
Author: Repertoire

How often have you had to downsize or scale back your vision for the future, because of some unexpected setback or obstacle? No doubt Gary Reeve – president of Midwest Medical Supply in

St. Louis, MO – has found himself in that position from time to time. But now, following his company's acquisition of Perigon Medical Distribution Group, he faces the opposite problem.

“We had been looking to be the premier distributor in the Midwest,'' says Reeve, who bought Midwest Medical in April 1996, 26 years after its founding in 1970. At the time, the company was generating approximately $36 million a year in sales. His plan had been to establish a hold on the acute-care, physician, nursing-home, government, home-care, pharmaceutical and specialty markets from Canada to Mexico, and Ohio to Colorado. Earlier this year, the company stood at $80 million in sales. Then the Perigon opportunity presented itself.

Perigon had been founded in June 1996 by Frank Schyving, a 20-year veteran of American Hospital Supply (now Allegiance Healthcare) and former president of Homedco (prior to its merger with Abbey Healthcare to form Apria Healthcare Group). Schyving had a bold plan to create a national, non-hospital distribution company, servicing the physician, home care and long-term-care markets. As late as 1999, he intended to generate $250 million in annual sales by 2002, then bring the company public. Perigon acquired nearly a dozen companies from 1996 to 2000.

In fact, while Perigon was on its acquisition spree, Schyving and Reeve had talked about merging their companies. But Schyving didn't want to get involved in the acute-care market, and the deal was scuttled. Then in November 2001, Perigon filed for bankruptcy protection. After so many years on the acquiring end, Perigon now found itself the object of several companies' attention.

As late as Feb. 20 of this year, Associated Medical Products – a distributor focusing on the home care and long-term-care markets – was poised to buy Perigon for $14 million. AMP President Steve Skoronski had an agreement with Midwest's Reeve to turn around and sell him Perigon's physician-market facilities in Indiana, Wisconsin, Wyoming and Salt Lake City. But the day before closing, AMP's bank balked, and Reeve ended up buying all of Perigon's operations except those in New York and Texas, or about $30 million of business. Midwest also took a pass on Perigon's corporate headquarters building in California.

The Texas business itself was about $17 million, says Reeve. “I was afraid we might choke on the acquisition,'' he says. At any rate, Midwest had previously taken steps to build its base of business in Texas, first by buying specialty distributor Campbell Critical Care in Dallas in November 1999, and then by picking up a handful of salespeople who had left United Medical Supply in Houston in Spring 2001, following that company's declaration of bankruptcy the previous December.

Going Forward
The acquisition of Perigon not only brings Midwest into new geographic markets, but into new business sectors as well, namely, the hospice/dialysis and lab diagnostics markets. With the acquisition, Reeve expects Midwest to generate between $110 million and $115 million in sales this year, with revenues divided the following way:
• Acute care: 35 percent
• Physician: 16 percent
• Long-term care: 16 percent
• Home care: 12 percent
• Hospice/dialysis: 9 percent
• Specialty: 7 percent
• Government: 5 percent

At press time, Midwest had begun to take steps to manage its sudden growth. “The most challenging part will be to get [Perigon] personnel to believe we can make this work, when they've had such a rocky road over the past several years,'' says Reeve. Just as important, Midwest will work hard to win the confidence of Perigon's customers. Meanwhile, “the manufacturers know how we do business, and are extremely supportive,'' he says.

The company will spend time in the next few months evaluating its information-systems options. It had bought distribution software from J.D. Edwards, but had yet to install it at the time of the Perigon acquisition. Meanwhile, Perigon had been running the Perigon Plus information system, designed by NxTrend Technology, Colorado Springs, CO. Reeve says he will take a second look at both systems before deciding which one will be installed companywide.

As of press time, several Perigon executives had signed on with Midwest, including David Chase, Vice President of long-term-care in Connecticut; David Shooter, Vice President of lab; and Darrell Tannatt, Vice President of hospice/dialysis.
“The Perigon acquisition is getting us into some good markets,'' says Reeve. “And we have a lot of good people who have come onboard.''