Exploring and Executing Strategic M&A Within The Growing Focus on Integrated Healthcare
Integration of Healthcare Bringing Diverse Sectors Together with Value Based Care
In the USA, a not so quiet evolution has been underway over the past few years with the cross sector integrations occurring within M&A initiatives. Some notable transactions include United Healthcare’s many acquisitions such as in pharmacy and home healthcare, CVS Health acquisition of Aetna, Humana joining forces with CenterWell, Walgreens acquisition of Village MD and Amazon’s entries into healthcare with One Medical and Pill Pack Pharmacy. While there are multiple strategies at play, there is a common theme: Managing profit and loss while controlling the quality and value delivered across growing population health initiatives.
For many privately held, lower and mid-market healthcare business owners , this can all look enticing but difficult to understand if such opportunities may make sense for their company. In many cases, it all starts with an understanding of:
- The strategic market initiatives in the current market and those on the horizon
- the valuation of your business in an M&A transaction and
- identifying which opportunities are most worthy of pursuit.
Regulatory challenges will persist as integrated healthcare grows
Recent uncertainty presents headwinds, but also yielding potential opportunities. Payers and benefit managers are continuing to seize opportunities to capitalize on expected member growth. For megadeals, antitrust opposition continues, albeit at more tepid levels. This is leading to smaller and medium-sized players finding themselves in more favorable positions during competitive sale processes as traditional strategic participants remain concerned with potential regulatory objections. Many private equity groups are also targeting consolidations across vertical AND horizontal sectors of healthcare.
The Usual Suspects
The need for health services companies to adapt and reinvent themselves to align with the current sector dynamics will only continue to grow. This is attracting new and traditional buyers in new and innovative ways. The consolidation is apparent in established care pathways with increasing focus on deploying new technologies, creating strong efficiencies and unprecedented growth opportunities. When exploring your strategic options, its no longer just the usual suspects in the market for your healthcare business.
Balancing Options and Opportunities
Every privately-held health care business ever created will, at some point, be sold, merged, bequeathed or closed. Along the way, the business owners have many options to consider as they map and execute their business plans.
The strategic options outlined below will fall into one of two categories equity options or growth opportunities. In each of the equity options, the business will be evaluated, presented and a change in ownership pursued. Strategic growth options are designed to enhance the current business operations, revenue streams and, ultimately, profitability for the business owner. The first step is to clearly understand the strategic business plan, available resources, liabilities and stakeholders’ personal goals for the business.
Benchmarking Valuation
The first step in exploring your strategic options is to understand the current market value of the business. This benchmark will aid in assessing goals and setting direction for equity and growth. There are many methods used to value a health care business, and most buyers protect their strategy as part of their negotiation tactics.
Understanding how your healthcare business may best fit in an expanding puzzle can unlock value for your stakeholders. It is vital that any business owner at least consider if this will lead to growth opportunities or propel valuation in a transaction on the near horizon. As we have said many times over the past few years… doing nothing in this market is not a strategic option.
Contact Paragon Ventures for more information and a confidential discussion of the opportunities for your business in the active M&A market for healthcare service companies.
