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Exit and Growth Strategies for Middle Market Businesses

Healthcare – Major Merger & Acquisition Focus

By Catherine Patience | Feb 23, 2016

Healthcare - Major Merger & Acquisition FocusHealthcare – Major Merger & Acquisition Focus

Recent reports shine a spotlight on mergers and acquisitions in the healthcare industry.  2015 was a banner year for M&A in this sector and reports suggest that healthcare will still be a major M&A focus in 2016, lagging only behind the technology and biotechnology/pharmaceutical industries

Three driving forces behind the continued activity in the healthcare sector include large cash reserves on corporate balance sheets, improving consumer confidence and readily available credit. With the Affordable Care Act’s emphasis on improving patient outcomes while at the same time lowering costs, healthcare companies are looking for competitive advantages.  During the second half of 2015 healthcare insurers made headlines with mega-merger announcements and if the deals pass regulatory muster, we could see just three major insurance players by 2017.  Smaller insurers may benefit from the fallout of such deals should mandatory divestitures spin off acquisition targets for other plans.

2016 will see patients becoming more “brand” conscious when selecting their healthcare providers, seeking the best care their money can buy. For health systems, this attention to brand will be critical as they seek to differentiate themselves to attract consumers. Affiliations, partnerships and joint ventures with well-known entities may be a growth strategy that makes more sense than a traditional merger from a branding standpoint.

Independent hospitals, clinics and medical groups may have a difficult time competing on their own and find it necessary to acquire complimentary groups.

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