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The Drive to Merge, Acquire, or Partner

By Jonathan Bees  
   April 12, 2016

MAP activity levels
Without question, survey respondents are bullish on the prospects for higher levels of MAP activity. Seventy-five percent of respondents say they will either be exploring potential deals or completing deals that are underway in the next 12–18 months, and only one in four respondents (25%) say they have no MAP plans. Further, nearly two-thirds of respondents (63%) say that their organization's MAP activity will increase within the next three years, and only 3% say it will decrease. Thirty-three percent say it will stay the same.

Another barometer of MAP activity is the total dollar value of the mergers and acquisitions that respondents say their organizations will be exploring over the next three years. While this year's survey results are comparable to last year's, there is a small shift to a higher total dollar spend on mergers and acquisitions. The $50 million–$99.9 million range is up three points to 17%, and $100 million–$499.9 million is up five points to 21% compared with last year (for a combined eight-point increase), while the lower $10 million–$49.9 million range is down nine points to 23%.

Interestingly, respondents indicate that it is not only total MAP spend that is increasing, but also the size of the deals being pursued. Nearly half of respondents (49%) say that they expect the dollar value of the mergers and acquisitions their organization will be pursuing within the next three years will increase, and only 5% say the value will go down. Sixteen percent say it will remain even.

Factors driving MAP activity
As mentioned earlier, the reasons behind the high rate of MAP activity range from traditional considerations such as the need for increased market share, improved scale, and increased financial stability, which are more tactical in nature, to more strategic and far-reaching factors such as anticipating the impact of the Affordable Care Act and the transition to value-based care.

For example, survey respondents who have considered or are considering a merger, acquisition, or partnership with another organization were asked about the main reasons for doing so. Two-thirds (66%) say that supporting sustainability of their long-term mission is the main reason for considering a MAP with another organization, an indication that providers are mostly thinking strategically when engaged in this activity. Note that expanding market share (55%) and improving scale (49%) rounded out the top three responses, suggesting that tactical considerations also play an important role in provider strategy.

Jonathan Bees is a research analyst for HealthLeaders.

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