As healthcare executives look to the year ahead, one key to their growth strategies is pursuing merger and acquisition opportunities.
Eighty-eight percent of 223 senior healthcare services executives responding to a survey conducted by the Healthcare Financial Services division of GE Capital last summer said they expected to pursue M&A in the next 12 months.
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That such a large percentage of healthcare executives are planning on M&A activity is “an indicator of optimism” among executives, said Darren Alcus, president and CEO of GE Capital, Healthcare Financial Services.
Such plans, Alcus said, suggest that executives see opportunities to grow their business and to acquire other businesses, a point of view that is supported by M&A experts, such as Hammond Hanlon Camp (H2C), a strategic advisory and investment banking firm that focuses on healthcare services and organizations.
In its Merger and Acquisition Trends in Healthcare report, released in November, H2C said that for the rest of 2013 and into 2014, the M&A outlook for healthcare will remain strong, mostly because of favorable capital markets, additional clarity around the health reform law and the continued need for clinical integration and cost control as the industry moves toward value-based reimbursement.
Alcus said that healthcare executives have recognized the changes reform is bringing to their organizations, and that is spurring a “growing wave” of consolidation in the market. “Regardless of whether or not the Affordable Care Act is implemented smoothly or there are any delays, I think the industry has viewed this as a trend where more efficient, more consolidated is going to win out in the long term, so we’ve seen a fair amount of consolidation plays across the healthcare sector,” he said.
While there has been and will continue to be a lot of M&A activity, healthcare executives across all of the industry’s sectors are being more strategic about who they acquire or partner with, said Alcus, a trend H2C also notes in its report. Healthcare organizations are trying to find more ways to create efficiencies and scale as opposed to growth for growth’s sake, Alcus said.