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Healthcare Industry | M&A News

By Peter Heydenrych | Dec 08, 2016

healthcare industryHealthcare industry providers are consolidating to get a better handle on revenue streams, reduce costs and control risk. Federal programs looking to control costs may further alter payment systems if consolidation is found to increase medical spending. The number of US physician practices owned by hospitals is rising rapidly, as changes in medical payment systems prompt providers to seek efficiencies through new operational structures. Some 31,000 practices were acquired by hospital groups between 2012 and 2015, leading to an 86% jump in the number of hospital-owned doctors’ offices, according to a recent study from Avalere Health and the Physicians Advocacy Institute (PAI). Nearly 40% of physicians in the US are employed by hospitals or health systems.

A growing number of insurers and health providers are transitioning to value-based reimbursement methods, with the goal of containing costs and improving care. Healthcare providers must adjust processes to maintain efficient, high-quality operations during the transition period. While fee-for-service reimbursements are still the primary mode of payment for US health care providers, insurers are making progress on goals to switch over to value-based contracts. Value-based payment systems include quality incentives, accountable care models, network management, and bundled payments. The US Department of Health and Human Services (HHS) is on track to meet its goal of tying 30% of traditional Medicare payments to value-based payments by the end of 2016, as well as higher targets over the next several years. Commercial insurers are also adopting new payment models; Aetna is aiming for 75% of spending through value-based contracts by 2020. According to a recent survey by McKesson reported by Healthcare Dive, hospitals are about 50% along the continuum towards full value-based reimbursement. However, challenges remain in areas including process automation and payer-provider collaboration. A majority of surveyed hospitals were not yet meeting value-based reimbursement goals including lower costs, better care coordination, and improved patient outcomes.

Posted by Peter Heydenrych.

Read the Entire Healthcare 4th Quarter Newsletter Here


M&A Trends in the Transport & Logistics Industry

By Peter Heydenrych | Oct 06, 2016

transport & logisticsTransport & Logistics: Trucking industry employment declined for a fifth straight month in June 2016. The freight economy began to soften during the first quarter of 2016 – after an uptick in employment in January, according to the American Trucking Associations (ATA), and driver demand weakened. Total employment for for-hire trucking fell by a noteworthy 6,300 jobs in June, according to a recent Department of Labor Employment Situation Report. Driver turnover rates also declined during the quarter, per the ATA, with turnover at large truckload fleets falling to an annualized rate of 89%. The turnover rate at small truckload carriers – fleets generating less than $30 million in annual revenue – came in at 88% during the same time frame. Turnover at less-than-truckload carriers, a small but growing part of the market, maintained its low rate, falling three points to just 8%.

Expansion by Amazon and other online retailers is boosting demand for warehouses in cities across the US, according to Bloomberg. E-commerce customers are becoming more accustomed to speedy shipping service, thanks in part to Amazon’s emphasis on same-day delivery, requiring retailers to find more warehouse space closer to population centers. The demand for warehouse space in cities is driving up rents: over the past year, prime warehouse rents are up nearly 10% across the US. The increase has been even greater in some large urban areas. Retailers that historically had one or two large warehouses in the middle of the country are now looking for smaller spaces in cities such as Atlanta, Dallas, and Kansas City to cut down their shipping times. Read more »


Healthcare M&A Activity

By Peter Heydenrych | Jul 28, 2016

healthcare M&A activityHealthcare M&A activity for North American based target companies in the Healthcare sector for Q2 2016 included 122 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $332 million.

A growing number of insurers and health providers are transitioning to value-based reimbursement methods, with the goal of containing costs and improving care. While fee-for-service reimbursements are still the primary mode of payment for US health care providers, insurers are making progress on goals to switch over to value-based contracts. Value-based payment systems include quality incentives, accountable care models, network management, and bundled payments. The US Department of Health and Human Services (HHS) is on track to meet its goal of tying 30% of traditional Medicare payments to value-based payments by the end of 2016, as well as higher targets over the next several years. Commercial insurers are also adopting new payment models; Aetna is aiming for 75% of spending through value-based contracts by 2020. According to a recent survey by McKesson reported by Healthcare Dive, hospitals are about 50% along the continuum towards full value-based reimbursement. However, challenges remain in areas including process automation and payer-provider collaboration. A majority of surveyed hospitals were not yet meeting value-based reimbursement goals including lower costs, better care coordination, and improved patient outcomes.

Industry Indicators

  • US consumer prices for medical care commodities, an indicator of healthcare costs, increased 3.2% in June 2016 compared to the same period in 2015.
  • US consumer prices for medical care services, an indicator of profitability for healthcare services, rose 3.8% in June 2016 compared to the same month in 2015.

Posted by Peter Heydenrych.

Read the Entire Healthcare 3rd Quarter Newsletter Here


M&A News in the Transportation & Logistics Industry

By Peter Heydenrych | Jul 07, 2016

transportation & logisticsTransportation & Logistics sector gained steam as the quarter closed.

A growing number of technology companies in the US are setting their sights on streamlining the local trucking industry. Similar to the popular ride-sharing app Uber, new on-demand trucking services connect shippers and local truckers through smartphone apps. By eliminating broker fees and reducing carriers’ reliance on phone conversations, faxes, and emails, such services promise to reduce administrative costs for carriers and make it easier for shippers to quickly find trucks and track shipments on their smartphones. Two companies offering on-demand local trucking apps, Cargomatic and Convoy, have already raised significant funding that should help them expand operations. Cargomatic, which operates in California and New York, raised $8 million in Series A funding in 2015; Convoy, which currently operates in Oregon and Washington, raised $16 million in Series A funding in March 2016. Read more »


Healthcare – M&A News From the Industry

By Peter Heydenrych | May 05, 2016

healthcare m&AHealthcare M&A activity for North American based target companies in the Healthcare sector for Q1 2016 included 180 closed deals, according to data published by industry data tracker FactSet.  The average transaction value was $114 million.

On the public markets, the Healthcare sector started out in decline with the rest of the market, but picked up significantly heading into the second quarter.

The rate of growth in healthcare spending in the US continues to increase after years of historic lows. The jump is due primarily to rising numbers of newly insured patients under Obamacare using more health services, higher government Medicaid spending, and prescription drug cost increases. Spending rose 5.3% in 2014 faster than growth in the previous dozen years, according to a report from actuaries at the Centers for Medicare and Medicaid Services (CMS). Government spending on programs including Medicare and Medicaid increased 11.7%, while prescription drug spending growth rose 12.2%. The increase was anticipated by economists, and the Obama administration called the escalating growth temporary, according to The Wall Street Journal. The CMS actuaries state that outcomes in future years hinge on whether new expensive drugs hit the market, according to US News. 

Rural hospitals in the US, which continue to struggle financially, are hindered by an inability to pay for IT enhancements that would help improve efficiency. Historically challenged by low-income populations and low patient loads, many rural hospitals are critical access facilities that rely on government support. Economic difficulties, federal budget cuts, lower insurance reimbursements, and new Medicare penalties for poor quality of care have worsened the situation. More than 65 rural hospitals have closed in the past five years, and about two-thirds operate with negative operating margins, causing them to eliminate or delay capital outlays including IT investments, according to Health Data Management.

Posted by Peter Heydenrych.

Read the Entire Healthcare 2nd Quarter Newsletter Here


Healthcare Industry News

By Peter Heydenrych | Mar 24, 2016

healthcare industryThe healthcare industry was the most active segment for global M&A in 2015 with deal value of $723.7 billion, up 66% over $436.4 billion in 2014 and the highest annual level on record, according to data published by industry tracker Dealogic.  Drug giant Pfizer’s proposed $160 billion merger with Allergan, announced on November 23, is the second largest M&A deal announced on record and the largest Healthcare M&A deal globally on record.

US Health Spending Jumps as Number of Insured, Medicine Costs Rise – The rate of growth in health care spending in the US increased in 2014 after years of historic lows. The jump is due primarily to rising numbers of newly insured patients under Obamacare using more health services, higher government Medicaid spending, and prescription drug cost increases. Spending rose 5.3% in 2014, faster than growth in the previous dozen years, according to a report from actuaries at the Centers for Medicare and Medicaid Services (CMS). Government spending on programs including Medicare and Medicaid increased 11.7%, while prescription drug spending growth rose 12.2%. The increase was anticipated by economists, and the Obama administration called the escalating growth temporary, according to The Wall Street Journal. The CMS actuaries state that outcomes in future years hinge on whether new expensive drugs hit the market, according to US News.

Several companies are working to make data from patient blood glucose monitors more easily available in health tracking apps and medical records. Johnson & Johnson’s OneTouch Verio Sync monitor has added capability to support the Apple HealthKit app, the first glucose device to do so; the device also has its own mobile app. Data collected through such devices can be extracted, analyzed, recorded, and easily accessed by patients and physicians, providing a more holistic view of a patient’s health including glucose levels, diet and exercise, and medication impacts. Other companies developing devices and apps to improve care coordination for diabetics include Royal Philips, Medtronic, Insulet, and Dexcom, according to FierceMedicalDevices.

Industry Indicators

  • US consumer prices for medical care commodities, an indicator of healthcare costs, increased 1.5% in December 2015 compared to the same period in 2014.
  • US consumer prices for medical care services, an indicator of profitability for healthcare services, rose 2.9% in December 2015 compared to the same month in 2014.

Posted by Peter Heydenrych.

Read the Entire Healthcare 1st Quarter Newsletter Here


M&A News from the Transportation and Logistics Sector

By Peter Heydenrych | Feb 04, 2016

Transportationa and Logistics sectorM&A Trends

Many of the larger companies in the transportation and logistics sector are looking to M&A as a means to grow revenue and expand capabilities. A prime example is FedEx’s 2015 acquisition of 3PL provider Genco, which enabled FedEx to expand its ability to process returns and provide other third-party logistics services.

Industry Update

Companies involved in freight forwarding and logistics are increasingly looking to acquire businesses in other countries to grow sales and remain competitive. In a bid to increase its scale and reach, Danish transport and logistics provider DSV agreed to purchase US-based UTi Worldwide for $1.35 billion in October 2015. The combined companies will have employees in more than 80 countries and a significant presence in Europe, the Middle East, North Africa, and the Americas. Other cross-border deals announced or completed in 2015 include the acquisition of US-based APL Logistics by Japan’s Kintetsu World Express, US-based XPO Logistics’ purchase of Norbert Dentressangle (France), FedEx’s bid for TNT Express (Netherlands), Japan Post’s acquisition of Toll Holdings (Australia), and France Geodis’s purchase of US-based OHL, according to American Shipper. Read more »


M&A News From the Healthcare Industry

By Peter Heydenrych | Nov 19, 2015

healthcare industryMedical practices across the US began adding new medical codes after the new ICD-10 medical coding system finally took effect October 2015. The new system of diagnostic and procedural codes is more complex and represents a significant increase in the number of codes used by physicians to get paid by insurers. Codes now number about 70,000 compared to about 14,000 codes used in the old ICD-9 system, which was established in 1979. Hospital codes also increased from 4,000 to 72,000. Healthcare industry experts worry that claims denials could double in number as providers and payers adjust to the more specific codes, according to the Wall Street Journal.

Health insurers struggle to attract millennials, some of whom believe they are too young and too healthy to need insurance. Marketing departments are working to create communications geared to these younger consumers, people who often research health conditions online and may be equipped with inaccurate information, according to Modern Medicine. Experts recommend focusing on young families experiencing life transitions such as relocation, employment, or childbirth. Social media campaigns, wellness webinars, and website videos can be effective, as can straightforward, easy-to-find information on billing, covered services, and physician networks. Although baby boomers are currently the largest target audience for health insurers and providers, millennials are poised to surpass boomers as the largest US generation.

Posted by Peter Heydenrych.

Read the Entire Healthcare 4th Quarter Newsletter Here


Transportation & Logistics M&A News

By Peter Heydenrych | Oct 22, 2015

Logistics 2M&A in the transportation & logistics space continues to be driven by non-asset logistics companies with proprietary technology. A deal that illustrates this is the whopping $1.8 billion cash acquisition of Coyote Logistics, LLC, a portfolio company of Warburg Pincus LLC, by United Parcel Service. The acquisition would allow UPS to expand its portfolio and transportation management services.

Proposed fuel efficiency rules will likely accelerate investment in fleet upgrades by the US trucking industry. Federal transportation and environmental regulators in June 2015 announced new fuel efficiency standards for heavy-duty trucks that aim to cut carbon emissions by 24% by 2027 and reduce oil consumption by 1.8 billion barrels over the lifetimes of the new trucks. Under the new rules, a best-in-class long-haul truck would get about 10 miles per gallon of fuel compared to the 5 to 7 miles today.

Technology companies are attempting to significantly streamline the processes used by shippers to book freight forwarding services. One such company, Freightos, recently received $14 million in Series B funding to expand its offerings, according to TechCrunch. Freightos has developed an online platform that helps forwarders manage their rates and automate their routing and pricing. Shippers can use the platform to receive instant competitive quotes that take into account a wide variety of shipping fees.

  • The average US retail price for diesel and regular gas, a major operating cost for trucking fleets, fell 33.9 percent and 31.3 percent, respectively, in the week ending September 14, 2015, compared to the same week in 2014.
  • According to data from the Interindustry Economic Research Fund, Inc. (IERF), an economic research group, revenue for US truck transportation is forecast to grow at an annual compounded rate of 5% between 2015 and 2019.

Posted by Doug Nix.

Read the Entire Transport, Logistics and Supply Chain 4th Quarter Newsletter Here


Healthcare Industry M&A Update

By Peter Heydenrych | Sep 10, 2015

HEIPG-Doctor and xraysWhile transaction volume has slowed a bit as the year has progressed, healthcare industry M&A is still a primary sector for M&A as big pharma looks to expand by acquiring small competitors with potential blockbuster drugs. In addition, big pharma companies are actively funding drug development companies with minority equity positions and the option for greater ownership should the drugs take off. Deals in the sector are also expected to be driven by healthcare IT innovation and hospital consolidation in the wake of the Affordable Care Act and declining reimbursements.

As patients are required to pay more and make more medical decisions, they likely will demand better information from providers. Despite being responsible for paying an increasing portion of their medical bills, most US consumers are not shopping around for the best deal. Fewer than 15% of Americans viewed comparative quality and pricing data for hospitals and physicians, and less than 10% actually used the data over a recent 12-month period, according to a survey by Kaiser Family Foundation. Reasons include lack of time to research competitors and difficulty find information and understanding technical terms. Consumers also struggled with inaccurate practitioner estimates and unexpected bills, according to Kaiser Health News. Some consumers with high deductibles end up forgoing care. Government health care officials are calling for greater pricing transparency to improve consumer access to comparative data.

Posted by Peter Heydenrych.

Read the Entire Healthcare 3rd Quarter Newsletter Here