M&A is playing an increasingly important role in the changing landscape of the healthcare industry with a growth in these types of transactions globally.
In 2017, the value of M&A deals in the industry rose 27 per cent to $332 billion and the deal count increased 16 per cent.
The US has been particularly prevalent in this area, with a recent study by Mergermarket showing that there were 579 deals for healthcare targets in 2017, the second-highest on record.
There are a number of reasons as to why there has been an upward surge in these types of transactions, including the following:
As patients enter into more consumer-like behaviour, the healthcare industry has to respond to this. They need access to convenient care options such as retail clinics and outpatient centres which will give healthcare companies a competitive edge. Therefore, a practice which does not have access to convenient care options could benefit from acquiring one.
Integration of Care
Healthcare organisations are also entering into M&A to benefit from increased integration, enabling companies to provide efficient and effective patient care, offering a ‘one-stop-shop’ to patients. This has been evidenced by the rate hospitals have been acquiring physician practices to extend their reach into the community. Recent analysis by the Physicians Advocacy Institute and Avalere Health showed that 5,000 physician practices were acquired by hospitals from July 2015 to July 2016 alone.
Consolidation of Costs
Patients are increasingly looking for value-based care meaning that healthcare companies are looking for ways to employ stricter cost control measures and manage financial pressures. One of the most popular ways to put this in place is through a healthcare acquisition.
Interest from Private Equity
There are a lot of factors for growth within healthcare such as an ageing population, the development of innovative drugs and devices, and a system that is fragmented, lending itself to consolidation. This has led to piquing the interest of private equity firms, as these factors make healthcare companies a compelling investment.
Going forward, these trends are expected to carry on and accelerate M&A transactions in the healthcare industry. Healthcare experts predict 2018 M&A activity to meet, or even exceed, the number of deals conducted in 2017 and recent data from the consulting firm Kaufman Hall shows that organisations have already announced 50 transactions for the first half of 2018.
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Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximising solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.