M&A Growth Strategy for Healthcare Companies

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The rate of healthcare mergers and acquisitions is likely to set a record in 2021, with the potential total number of deals topping 3,000. Overall, this year’s monthly average has been 243 deals, compared to last year’s 161. According to David Braun, founder & CEO of Capstone Strategic, a leading M&A strategic consulting firm, the reasons for the robust M&A activity following lesser deals in 2020, are many including rollout of COVID-19 vaccine booster shots. Having successfully facilitated over $1 Billion of client transactions in over 30 countries across more than 100 industries, we sat down with David Braun to get his top tips on what healthcare companies should consider when evaluating an M&A growth strategy.

1. What is the first step healthcare companies need to take before they move on an acquisition?

Every organization needs to honestly assess their core competencies, business culture and ability to share risk tolerance for a potential acquisition. That is because actually acquiring another company means taking all of it under your umbrella or blending it with your existing operations. Not only will you be acquiring their strengths, but also their weaknesses, which could include redundancies. 

2. Why are you doing it? 

Companies that answer this question with a bucket full of reasons will fail because when it comes to acquisitions – having one singular reason provides a focused purpose with identified ROI while many reasons have the potential of creating chaos and conflicts among leadership. Having one distinct reason, that can easily be articulated and brings everyone to the same “aha” moment, will be empowering and drive clear decision-making. When companies make the mistake of trying to use the acquisition opportunity to fulfill multiple needs, it can justify almost any target. And the idea that the M&A has unlimited possibilities will almost always spin the deal out of control.

3. Are you ready? 

It isn’t enough to have C-level buy-in and a mindset to take your company to the next level. Being ready means having the bandwidth to do the hard work it takes to evaluate an acquisition to see if it is the right fit. Following your gut can only get you so far on the road to a successful M&A which is why everyone must be open to knowing what they don’t know. It may seem like a no-brainer that a medical device manufacturer should acquire compatible software but that won’t always be the case. The vision may be the right path but crossing the finish line requires preparation and collaboration. Your team must recognize they may need to work with multiple specialists. This will be required to gather an understanding of all aspects of the company they want to acquire from compliance to supply chain to distribution to licensing to patents to logistics, and more to determine if it is the right strategy and fit. 

4. Any other tips for healthcare business executives considering an M&A?

Healthcare executives and medical company teams shouldn’t let their excitement overwhelm them. When all of the preliminary work has been done and they are ready to reach out – manners will play a big part! Whether the seller has officially listed their business or just told a few insiders about their interest in entertaining offers, establishing trust through early face-to-face meetings will be important. Communicate why you have identified this M&A as a win-win and your plans to bring them success along the way. If integration planning begins, don’t take shortcuts. Relevant research and a structured process is a sign of respect toward both your stakeholders and theirs. Ultimately, assessing the value of an M&A healthcare deal on both sides will be equal parts art and science!  For more info visit: CapstoneStrategic.com.