Healthcare services, life sciences, and pharmaceutical companies have managed to attract investors and private equities during the first three quarters of 2022. Patient Square Capital’s acquisition of SOC Telemed for $385 million, Centene’s acquisition of Magellan Health for $3.27 billion, and R1 RCM’s acquisition of Cloudmed for $4.1 billion are some notable acquisitions of this year.
Although M&As in the healthcare industry have slowed down a little, private equities with abundant capital may continue investing heavily in the healthcare sector in the next 6-12 months. Despite several myths and wrong perceptions, M&As in life sciences and healthcare are valuable for the public, patients, and healthcare institutions.
The text to follow will elaborate on the benefits of healthcare M&As and how technology like virtual data rooms can play its part in successful transactions. You can also know more about healthcare m&a trends here and get in touch with the M&A community.
Reasons why mergers and acquisitions in healthcare are valuable
1. Better access to resources and capital
Mergers and acquisitions benefit both small-sized hospitals, healthcare units, and larger entities. For instance, a small hospital with limited resources or in danger of being wiped out when acquired by bigger companies can have access to more capital, better technology, and other resources needed.
On the other hand, the company acquiring that hospital can have access to the unique resources of the hospital acquired. Those resources may include skilled doctors, in-house staff, clinical research, etc.
2. Market growth and new opportunities
It may not take much to build a new hospital in a specific area but developing a brand out of it can take time. In fact, entering new markets is even more difficult because of existing market players. Even a small hospital in a county or a city can give a tough time to bigger organizations.
Acquisitions help organizations enter new markets without facing a lot of competition and other barriers. Most importantly, when a company has a large inventory of resources, such acquisitions can help wipe off competition.
3. Reduction in costs
Acquiring small-sized healthcare units and hospitals can help larger entities achieve economies of scale. How so? Many small hospitals consume a significant amount of funds for administrative purposes such as billing software, payroll solution, HRM software, data management solutions, etc.
In case of an acquisition, there will be no need for the target company to have separate solutions for the processes mentioned above. It will reduce the cost of operations, ultimately leading to profit maximization.
How can technology help in healthcare M&As?
The M&A industry greatly benefits from technology like online data room software. In fact, not only M&As, the healthcare industry itself is a massive consumer of virtual data room software. Data room software streamlines data management, facilitates clinical trials, and assists in compliance requirements.
Here is how an electronic data room facilitates M&As in the healthcare industry.
1. Central data storage
Virtual data rooms are cloud-based solutions which means the documents needed for M&As can be stored in one place. A centralized database is beneficial for everyone involved in the deal. Investors, stakeholders, boards of directors, advisors, intermediaries, PE firms, and buyers can easily access documents from anywhere, anytime.
2. Data protection
Data protection is a crucial element for the target healthcare businesses during M&As. Healthcare companies have the additional responsibility of protecting customer data. Hiring data room services for M&As allows the target firms to control data flow during the transactions.
Modern-day virtual data room vendors provide robust document security features to ensure 100% control over your corporate document. These features include document access control, digital watermarks, revoke document access, file trackers, and view-only or fence View mode (very useful in M&As or third-party transactions.
3. Safer and faster due diligence
Due diligence, an important step in M&As, becomes faster, safer, and more productive. Healthcare firms also use virtual data rooms for pre-due diligence. Then, after the initial screening, the company can move to due diligence, where interested buyers have access to all corporate documents needed.
Here is how VDRs make due diligence faster:
- 24/7 access to due diligence documents
- Faster and safer data sharing
- More streamlined communication and safer online meetings, as high-end virtual data room providers boast all modern-day communication tools.
- Detailed, real-time Q&A sessions
4. Transparency
Transparency is a fundamental aspect of M&As. Investors, suppliers, distributors, stakeholders, and partners are involved in the M&A process. Everyone has the right to know how the deal is progressing, the changes in the scope of the transaction, etc. Most importantly, everyone wants to make sure nothing goes behind closed doors.
Virtual data rooms mostly have audit trails. It generates detailed reports on data room activities. Any unauthorized or suspicious activity can be immediately traced, and the management can take action accordingly. Constant monitoring ensures maximum transparency during M&As.
Some of the best virtual data room providers for M&As include iDeals, DealRoom, Caplinked, Ansarada, and Merrill.
Final words
The year 2022 has seen some gigantic M&As in the healthcare sector, and private equities are keen to invest more in the industry in the coming 6-12 months. Acquisitions in healthcare reduce competition, increase operational efficiency, boost market growth, create new opportunities, and help companies achieve economies of scale — while virtual data rooms support them on their way to growth.
