Globalization of healthcare contributes to a continually developing global medical services industry that encompasses hospital, physician and clinical, nursing and continuing care facilities, home healthcare, surgical facilities, emergency services, laboratories and other providers.
An industry that was once about volume-based care has strategically shifted to value-based care. Because this requires improvements in facility efficiencies and quality, it also calls for more specialized external service providers. One tactic that medical services companies are using to gain competitive advantage is to keep their core caregiver and third-party caregiver groups under the same roof. As medical services must now deliver on value-based care, there is an increased need for integration of care and management of financial constraints.
As populations increase, especially aging populations, and chronic diseases remain prevalent, the demand for medical services increases, and so does the demand for specialized medical caregivers.
By the year 2030, it is estimated that the global demand for health workers will reach 80 million workers, while the supply of health workers is only expected to reach 65 million over the same period. This will result in a worldwide shortage of 15 million health workers.
When regulatory burdens on healthcare companies are reduced, technological advancement escalates, creating opportunities for medical technology companies including mobile and wireless providers. Also, advancements in surgical techniques result in less invasive treatments and shorter recovery times, altering the traditional hospital model. Additionally, third-party lab providers and research companies grow in demand along with the need for more complex clinical tests and services.
M&A Due Diligence
Mergers and acquisitions in the medical services industry require especially savvy due diligence in order to obtain a completely accurate assessment and valuation. Deals can be particularly complicated between hospitals and health systems.
As a seller, it can be extremely important to have sell-side due diligence conducted. Getting ahead in the process months in advance can be well worth the costs. When it comes to the medical services industry, billing and coding issues can trigger major delays in any M&A transaction.
Other benefits of sell-side due diligence include:
- Enhanced credibility and positive reputation of the seller on the market
- The increased possibility of higher bids
- Adequate preparation for management and employees so that there is minimal disruption in workplace operations
- The potential of a shorter due diligence cycle on the buyer’s side
- A decrease in the chances of surprises that can derail a deal, which can increase the likelihood of the transaction being a successful one
Medical Services M&A Drivers
Among the key drivers of M&A activity in the global medical services industry, the top reasons include:
- The goal of increased market share to broaden networks and patient access
- Improved integration across the continuum of care
- Keeping pace with increasing prevalence of consumerism, which includes more convenient, non-traditional care settings
- Gaining access to capital for investment in staff, new technologies, medical equipment, and improved operations
- A way to improve efficiencies and enhance patient satisfaction
- Reaction to rising consolidation among insurance payers
- A growing need for alternative payment models, which reimburse providers based on value rather than volume of services
Traits of High-value Targets
In this sector, the attributes of high-value M&A transactions can vary greatly, however certain characteristics can be found to be consistent across most successful deals:
- A defined operating model with strategic vision and revenue-growth and cost-reduction strategies
- Transparency in communications regarding culture and organizational goals
- Focused integration planning that aligns with the deal’s rationale
M&A in Diagnostics
Diagnostics present unique circumstances for M&A activity apart from the medical services industry. Clinical laboratories in the medical services industry vary in size, business model, areas of concentration, R&D capabilities, as well as in their relationships with providers and payers. With countless labs in operation, acquiring the right one can be challenging. Large public labs tend to focus on deal volume, while other buyers are interested in the laboratory testing market, and private equity leans towards companies with attractive cash flow yields. In many cases, because diagnostic manufacturers, life-science companies, and big pharma all need access to patient and pathology samples for research and development, labs are strategically acquired by non-laboratory healthcare companies.
If you are looking for exit and growth strategies, Benchmark International offers unique ways to identify the perfect buyer, take your company to the next level, and create dream exits. We look forward to working with you.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkIntl.com
Europe: Michael Lawrie at +44 (0) 161 359 4400 / Enquiries@BenchmarkIntl.com
Africa: Anthony McCardle at +27 21 300 2055 / McCardle@BenchmarkIntl.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $6B across various industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 12 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.