Reshaping Healthcare M&A: How Competition and Technology are Changing the Game

Both up and down market, a common theme in healthcare M&A has emerged: Buyers are looking for acquisitions that can evolve and respond to the rapidly changing landscape. Big insurers are joining forces with distributors to create new, vertically integrated structures. Private equity firms are consolidating fragmented sub-sectors and investing in technology that can reduce costs and change how care is delivered. 

Indeed, leveraging innovation to save on costs is a key motivation for healthcare M&A deals. "Everything is about cost take-out, given the amount of competitive pressure in the industry," said Brad Haller, a director in West Monroe's M&A practice who focuses on healthcare deals. "All of the different stakeholders are trying to outdo each other on price."

To better understand the drivers and challenges for healthcare acquirers - and to analyze the role of technology in healthcare M&A - West Monroe conducted a survey of 100 market practitioners in partnership with Mergermarket. The survey indicates that the healthcare sector's robust financial performance will drive dealmaking amid heightened competition for targets. Acquirers are leveraging domain expertise and forming novel alliances to win deals and create value post-close. Technological change is at the forefront, as buyers use M&A to gain access to technology and disrupt the completion, Yet our study shows that due diligence in the areas of IT and cybersecurity - which have become cornerstones of the modern healthcare industry - often fall short.

The race for assets is likely to heat up further as strategic buyers and private equity firms look to put capital to work. The task for acquirers is to place the right bets in this dynamic market.