Health IT mergers and acquisitions are now gaining traction, and at a rapid rate. While there are a number of reasons for this, the ultimate driving force is the shift from fee-for-service to value-based care.
Providers want and need innovative health IT tools in order to meet the current demands for high-quality care, but roadblocks prevent the seamless integration and use of these tools. The most critical offender is the lack of compatibility. Provider frustrations over this lack of coordination and adaptability will peak in 2019, with vendors expected to feel the brunt of this challenge. The result is predicted to be a surge in health IT M&A, with the aim of maximising innovation while enhancing integration.
As the era of health IT M&As approaches, now is the time for companies to prepare. Whether the potential acquirer or acquisition target, big or small, public or private, health IT companies need to prepare well in advance for M&As and keep the following points in mind.
For the Acquirers:
- Leverage an outside expert -Tap trusted outside experts to ask questions about the type of technology you’re looking at acquiring. It’s worthwhile learning as much as possible about the technology, such as how it compares to competitors and its potential for either success or failure. This will enable you to make a better-informed decision on whether the technology would be a suitable fit within your company, while also showing your prospects that you know what you’re talking about.
- Utilise your tech team - While outside knowledge is important, don’t forget to go to the people who are already onboard. Your own tech team is a valuable resource that provides on-the-fly answers to any knowledge gaps you may have on the technology. The team will have the capability to provide additional insights and ideas you may not have taken into consideration. Ask your engineering lead to estimate the time and capital required to integrate the technology you are interested in, and apply it to your business plan.
- Examine the facts -Ensure you dig deep and source factual evidence that supports your desire to purchase the company. Once done, use this logic to plan an integration strategy prior to making any decisions, however, be realistic and not optimistic.
For the Acquirees:
- Take ownership of your strengths and weaknesses - Companies that are wishing to acquire you are on the look-out for technology that will make their existing portfolio even stronger. Place a real emphasis on fully developing your company’s core technology solution and position, and ensure that there is clear customer value. When it comes to weaknesses, be honest and open. If you can show the acquirer how they can improve or lessen the weakness, it will make you a stronger acquisition target to acquirers.
- Have your financials in place - If you aren’t producing positive cash flow, curb your spending to focus on the necessities. For a start-up, this equates to focusing research and development on core technology, demonstrating dedication to the solution and showing potential acquirers the areas of your company that hold enough value for investment.
- Compel potential acquirers - The acquirers should be made to feel that they can do a better job at running the business, as they are acquiring the technology with the idea of making it even more powerful and effective. Be proud of what you have built, but don’t be defensive.
Companies that fail to prepare for the M&A era will be left behind, therefore its essential for health IT vendors to develop plans and strategies internally in order to protect and advance their innovations.
Additionally, while the level of chaos and competitiveness might seem somewhat scary at first, it is important to bear in mind that M&As provide opportunity. These deals are meant to enhance technology innovation in healthcare and ultimately contribute to the improved health of the patient population. Therefore, if you find a suitable partner and make the right deal, it will be a home run for the future of healthcare.