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Trends In the Evolution of Healthcare Consolidation Transactions

Mark Reiboldt, for HealthLeaders Media, April 19, 2010

These types of scenarios often require additional investment to grow or even sustain the acquired business. This happens frequently, most of the time where the companies do not realize issues until the deal is closed, resulting in the failure of countless mergers.

Trend 2: Engaging Investment Bankers. The second area where companies can improve a deal's success is to engage investment bankers with industry expertise. Only within the last ten years have financial services companies developed specialized focus areas to work with healthcare companies, which unfortunately developed as the result of numerous failed transactions. Healthcare businesses are unique, as are their transactions, thus requiring knowledge, experience, and expertise unique to the industry, which healthcare executives are seeking, rather than depending on advice from generalists.

This is particularly prevalent in deals involving health systems, medical groups and other companies depending heavily on the third-party reimbursement system unique to healthcare. While there are still some financial advisors boasting cross-industry expertise, the days of an advisor going from a telecommunications deal one day to a healthcare transaction the next have faded almost entirely.

Trend 3: Embracing Post-Merger Integration. The third area where companies are taking action to implement successful deals is through embracing post-merger integration planning early in the process. Healthcare financial leaders must understand that the “post” in post-merger integration is a misnomer. More than 90% of the value in post-merger integration lies in the planning that occurs prior to the deal ever being structured. This often occurs in conjunction with due diligence, because that information can ultimately be used to form the combined entity's go-forward strategy.

While there is much more to implementing a successful transaction than the areas outlined above, these are some of the key components of today's healthcare deals that many executives are embracing to be successful. By the same token, these are also areas that when ignored are proving to be the most devastating for organizations. If modern healthcare executives are going to be effective in their growth strategies through consolidation, industry businesses will need to evolve, so they can grow more innovative and dynamic in their execution strategies. The good news is that they do not have to go at it alone. A good transaction advisor will exponentially prove their weight in gold.


This article was prepared by Mark Reiboldt, vice president at middle market investment bank, Coker Capital Advisors, where he specializes in mergers and acquisitions for healthcare technology and services companies. He can be reached at markreiboldt@cokercapital.com.
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