Health StaT! M&A health strategy and tactics
Health care: Undergoing a tectonic shift that will likely support robust M&A, both on Wall Street and Main Street
C-suite and boardroom strategic conversations continue to be robust:
Mergers, acquisitions, joint ventures and other forms of affiliation are enabling organizations to transform care delivery systems and payment incentives while improving financial viability and growth in the wake of changing reimbursements. Assuming the level of boardroom and C-suite conversations is a leading indicator, strategic M&A will likely continue to be strong.
Tectonic shift caused by the Affordable Care Act:
The health care landscape, having been impacted by the tectonic shift from volume to value-based payment for services inspired by the Affordable Care Act (ACA), continues to experience aftershocks, most recently signified by the Medicare Access and CHIP Reauthorization Act and Quality Payment Program.
This particular legislation, which will likely move physicians over time to operate in a value-based reimbursement system, is another regulatory consolidation driver, motivating constituents on both sides of the provider and payor ecosystems to transact via M&A strategies.
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The specifics of legislation aside, the reality of the current and trending macroeconomic and demographics profiles demands that the market deliver on value.
Recent M&A integration will likely create fallout (and opportunity):
We anticipate an increase in corporate divestitures and carve-outs, driven by multiple factors, including post-M&A integration outcomes, strategy shifts, resource and capital reallocations and balance sheet needs. In today’s market, what may be non-core for sellers often finds a broad audience of buyers.
Private equity firms remain an important player in the health care ecosystem:
Private equity (PE) interest in health care continues to be robust, bringing significant strategic angles and relationships to bear in aligning with new portfolio companies. PE continues to be a robust and nimble competitor to strategic acquirers, bringing strategy, opportunity and value where others may not.
Global changes, local impact:
We expect the mix of M&A activity to continue to move from Wall Street to Main Street as national M&A activity inspires local market changes. The imperative to drive clinical and cost efficiencies in operations and expand one’s service profile is necessary for all constituents and can be more expediently addressed through strategic transactions.
M&A deal flow will likely continue to be strong across all markets as all companies seek to more rapidly accomplish strategic imperatives driven by the march to value-based reimbursement.
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Ernst & Young Capital Advisors, LLC (EYCA) is a registered broker-dealer and member of FINRA ( www.finra.org ) providing sector-specific advice on M&A, debt capital markets, equity capital markets and capital restructuring transactions. It is an affiliate of Ernst & Young LLP serving clients in the US.