Reshaping Healthcare M&A: How Competition and Technology are Changing the Game

30 May 2018

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M&A is playing a critical role as healthcare companies seek to adapt and thrive in a fast-changing marketplace. Pressure to lower costs and adjust to value-based care models, as well as meet the demands of a technology-driven world, have created a need for buyers to seek healthcare targets capable of evolving within the landscape. At the same time, increasingly complex technologies and aggressive deal timelines present hurdles to acquirers when assessing targets.

To better understand the drivers and challenges facing healthcare acquirers, West Monroe commissioned Mergermarket to survey senior dealmakers in the sector for their insights.

Key findings of the report include:

  • 41% of respondents said a company’s preparedness to respond to regulatory change was a top concern when it comes to operational or personnel issues, and 40% said a management team’s willingness and ability to adapt to market trends was a top priority.
  • Nearly half of respondents (49%) said they were dissatisfied with the cybersecurity due diligence in their recent healthcare deals. That figure is up from 16% in West Monroe’s 2017 “Software M&A Frenzy” and up from 3% in West Monroe’s 2016 “Testing the Defenses: Cybersecurity Due Diligence in M&A” report.
  • The top sub-sector of interest for PE firms is digital health or healthcare IT (21%) while strategic buyers prefer CROs and biotech acquisitions (21%).
  • More than three-quarters of respondents (79%) said they would seek more joint ventures and alliances over the next 12 to 18 months.
  • Only 10% of participants report being very satisfied with IT due diligence, yet 48% are driven to acquisitions to disrupt incumbents using technology. Further, 26% said that outdated IT infrastructure was the biggest oversight during due diligence in their last healthcare acquisition. Prioritizing your IT investments based on your strategy is critical.