Maximizing the Success of Healthcare Mergers and Acquisitions

Various types of transactions, such as healthcare mergers and acquisitions, joint ventures and physician alignment deals, are not new to hospitals. Indeed, there have been multiple waves of consolidation within the healthcare provider industry dating back decades and each wave brought new changes and in some cases challenges for those involved in such transactions. The wave of consolidation that occurred in the late 1990’s and early 2000’s ultimately resulted in many negative experiences and outcomes for both hospitals and physician-owned organizations. Many deals that brought organizations together during this period eventually unraveled, in some cases leaving baggage behind that continues to impact the dynamic between hospitals and physicians even today.

The last few years have marked another fresh wave of consolidation among healthcare provider organizations across the country. This includes large-scale hospital mergers involving organizations pursuing a “strength in numbers” strategy focused on building powerhouse health systems. But perhaps the majority of healthcare transactions today more commonly entail situations where hospitals and physician-owned entities are once again coming together to pursue value within the evolving healthcare delivery paradigm that continues to take place, and doing so through a variety of joint ventures, affiliation structures and alignment transactions.

Achieving Value From Hospital Operations

Regardless of the drivers behind the current wave of consolidation, one of the major questions that continues to remain unanswered and which many of our clients from these organizations put to us is how healthcare organizations can ensure – or at least increase the probability of – the ultimate result from such strategies is value creation. Meaning, how can healthcare organizations truly achieve value over an extended period of time from their transaction strategies? Similarly, how can leaders within such organizations develop transaction strategies that will ultimately result in long-term value?

Hospital to hospital mergers and hospital acquisitions of physician practices can help hospitals reduce costs and increase overall efficiency. Although the outcome will benefit consumers, the process of merging entities is not simple. Hospitals face complex tasks in integration initiatives, and they can no longer expect just any deal scenario to be successful. So, how can hospitals find the pathway to achieving value? Further, what makes a deal successful?

The primary component of a successful transaction is comprehensive due diligence. Both parties must manage the deal as a process and address all pieces strategically. Extensive planning must occur for a seamless transition into integration and assimilation. Including an advisor in these discussions can be extremely helpful for many reasons. Advisors are critical in mitigating risk, and they bring an independent perspective, which increases the likelihood of overall, long-term success between the parties.

Extensive strategy development and planning must undergird the deal process to achieve long-term value. Analyzing the market to determine community needs is necessary for setting targets and resolving issues. The organization must also define the process, financial objectives, roles, and expectations of their integration plan.

Deals can start small, but the process will pick up pace quickly and require more attention if the organization is to succeed in generating long-term value. Coker can facilitate an entire deal process or provide expertise in specific areas throughout a transaction. We are unique in that our team understands the perspective of both buyers and sellers, and we can represent the interests of both hospitals and physicians.

If you are seeking answers to questions listed above or would like more information about these transactions request a recording of our September edition of our monthly Coffee with Coker Webinar series led by Mark Reiboldt which took place on September 22, 2016, or download our white paper titled “Maximizing Success of Hospital M&As: Strategies to Ensure Long-Term Value”. And if you are interested in how Coker can help you maximize the success of healthcare mergers and acquisitions, please call 678.832.2021 to speak with Mark Reiboldt, Senior Vice President.

By |February 17th, 2017