Purchasing another company’s assets or ownership equity is common for a healthcare entity to boost revenue and profit. The purchase can be a friendly merger or hostile acquisition. A friendly merger of equals can be structured as a stock offer or cash. A hostile acquisition is typically a cash offer.
Healthcare Transaction Advisory strategic planning is a process that creates a plan for your organization to progress from your current state to your desired future state. It involves collecting and analyzing critical information to ensure you make the most informed decisions. It can uncover issues impeding performance, such as unsatisfactory employee morale and lack of communication, and enable you to identify and develop new revenue streams. Experts can help you with various healthcare transaction services, from valuation and due diligence to strategy, data analytics, and more. Mergers and acquisitions in the healthcare industry are critical to addressing the growing demand for cost-effective, high-quality healthcare. However, these transactions present unique challenges — from regulatory hurdles to the complexity of healthcare IT infrastructure.
Financial analysis is the process of examining data regarding a business, sub-business, or project. It helps in identifying viability, stability, and profitability. Examples of financial analysis include trend analysis, solvency and liquidity analysis, cash flow, and valuation analysis. During the M&A process, companies need to construct accurate models that reflect the impact of the transaction on each business. Creating these models requires careful consideration of the potential financial benefits, costs, and synergies resulting from the deal. For example, a company may anticipate higher revenues from cross-selling products or lower costs from streamlining operations. However, some of these anticipated benefits may still need to materialize. For example, a new drug being developed by company B could have unexpected side effects. This would lead to a poor return on investment and may offset any savings that the company expects to realize. Hence, it is essential to incorporate conservative net income estimates into the modeling process.
Due diligence has long been used legally, meaning “requisite effort.” Business M&A transactions mean thoroughly researching a commercial enterprise before engaging. It can be time-consuming and requires an in-depth understanding of the company being investigated. The buyer’s team collects, reviews, and analyzes information about the target company and its assets. This includes the target’s financials, products, customers, competitors, marketing strategies, and intellectual property. They also look for any red flags indicating a problem with the deal. There are two types of due diligence: hard and soft. Complex due diligence focuses on the target company’s financials, including examining its balance sheet to ensure accurate and sustainable numbers. It also examines the target’s legal status and how they interact with their stakeholders. Finally, it examines whether the target’s founders and executives are vested in the stock’s performance, which can affect the share price.
Making a deal requires negotiating the terms that will shape the transaction. This is a complex task, and the outcome of these negotiations can significantly affect the value of the transaction for the buyer. As part of the due diligence process, staff will evaluate a proposed buyer’s financial condition to ensure that it is financially and competitively viable. For this reason, the buyer should provide staff with all financial information as soon as possible. Experience suggests that some buyers agree to provisions, such as long-term non-solicit agreements, that create perverse competitive incentives. This could lead to a negotiated settlement inconsistent with the Commission’s objective of remedying the merger’s likely anticompetitive effects. Other issues that may arise during the negotiation process include obtaining consent and approvals from third parties, an essential requirement for most healthcare transactions. These issues should be addressed promptly and with the help of counsel.