Healthcare Mergers and Acquisitions activity and resulting industry consolidation is surging. Why?
Below is a snapshot of the drivers of healthcare mergers and acquisitions activities, particularly real-estate based services.
- Low Interest Rates and Availability of Capital
- Favorable Demographics/Need-based Industry
- Cost Pressures as Public & Private Insurers Increasingly Contain or Reduce Provider Reimbursements: – Network Formation/Bundled Payments Model Rewards Integrated Healthcare Systems that Lower Costs and Improve Quality
- Fragmented Industry Ripe for Consolidation: – Consolidation Increases Revenues, Economies, Efficiencies and thus Profitability; Diversifies Revenue Mix & Strengthens Balance Sheet (lowers borrowing costs). Single-site, Standalone facilities cannot attain the economies of scale necessary to survive and compete.
- Ability to Leverage the Real Estate – (enables low blended cost of capital and high collateralization)
- High Regulatory, Reimbursement & IT Compliance Hurdles Cause Consolidation
- Sellers’ Market Conditions
- Mergers and Acquisitions is Contagious