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Medium M&A

Surgical Robot

#Healthcare
ProHub Comment

This case teaches break-even analysis as the primary financial framework for M&A decisions in healthcare technology. The candidate must recognize that even the superior Da Vinci alternative produces unfavorable returns relative to the robot's 8-10 year lifespan, revealing that neither acquisition is financially justified despite operational improvements.

Estimated Time 15 minutes
Difficulty Medium
Source Cornell
50 / 100

Your client is a privately owned hospital that offers high-tech surgical procedures. They would like to start using robots in their surgeries.

Recently, a new surgical robot, Robot X, was developed and has now been on the market for six months. The robot is highly precise and drastically reduces human work in surgeries.

Should your client acquire Robot X?

Clarifying Information

  1. Technology replacement rate is ~10 years for surgical robots
  2. Client specializes in minimally invasive surgeries, but has never employed a full robot
  3. Of the hospital staff who are authorized to perform surgeries, 70% are technicians (with Bachelor’s degree) and 30% are medical professionals (with M.D.)
  4. Buying a surgical robot will allow our client to hire 5 fewer staff technicians per year
  5. Each staff technician is paid an annual salary of $60,000
  6. The hospital generates an extra $300/surgery that a surgical robot performs
  7. There are currently only a few surgical robots on the market; the Da Vinci Robot is the leader in the market