A recent study by West Monroe and Mergermarket, Reshaping Healthcare M&A, provides an in-depth look at how
mergers and acquisitions (M&As) are continuing to transform the industry in
the face of mounting complexities.
From aging populations to disruptive technologies, we take a look at the
key findings of the US based study, undertaken by 100 senior executives, split
between corporate (33%) and private equity (67%). All involved have completed
at least one healthcare detail over the last 24 months.
Whilst the US is continuing to witness exponential growth across the
healthcare sector, its aging population is driving demands for home healthcare
tools and pharmaceutical solutions.
Competition is also mounting as non-traditional players seek to enter
the market, such as Best Buy and Amazon, making it imperative for traditional
providers to cater to this rapidly changing landscape.
Consolidation is enabling healthcare companies to further scale and
retain positions in the market, with 58% claiming this to be the overriding
driver. Others involve disrupting incumbents using technology (48%), as well as
expanding into new markets (37%).
“Businesses that have matured over time have also accumulated assets
that have increased in value. With affordable valuations being key criteria of
attractive targets, the number has fallen considerably,” an operating partner
at a private equity firm on the East Coast noted.
A number of healthcare companies are consequently entering
non-traditional acquisitions, such as Roche’s $1.9bn acquisition of Flatiron Health, in order to harness
essential digital tools and remain ahead of the curve.
“Many multi-site healthcare providers do not have that Amazon-like
customer experience,” explained Director of West Monroe’s Healthcare &
Lifesciences Practice, Brad Haller.
“We’re used to that in the consumer space now, but healthcare is still
far behind. They often use the excuse of needing to manage patient-protected
data, which is valid. But there’s also a real opportunity to improve.”
Popular technologies across the industry include mobile technology –
the Samsung and Babylon Health being a recent example. Others
factors include enhancing the use of data and analytics (37%), utilising blockchain
(30%), telehealth and health wearables, which will all work to reduce
escalating healthcare costs and drive the development of patient-led care
Through vertically integrated healthcare deals, insurers are also
looking to further partner with distributors to deliver a multitude of
advantages. CVS Health’s $69bn deal to acquire health insurance giant Aetna is a
case in point.
Nonetheless, a dominant focal area is the growing interest in joint
ventures, where up to 79% of respondents stated that they will likely go
down this avenue within the next 12-19 months.
The mega partnership between Amazon, JPMorgan and Berkshire Hathaway created
shockwaves within the industry and caused stocks across healthcare providers to
nosedive. Main advantages the study has found will be the access to external
expertise and technological capabilities, a reduction in risk profile and will
enable businesses to grow top-line revenue more quickly (42%).
Click here for the original article from Healthcare Global.