Political Uncertainty Top Factor Threatening Healthcare M&A
Political uncertainty and investor confidence are the top challenges of healthcare M&A in the coming year, but professionals are still pursuing deals, a survey finds.
Source: Getty Images
By - Healthcare merger and acquisition (M&A) professionals cited political uncertainty as the factor most likely to sink deals in the coming year, but an upcoming presidential election is not slowing down healthcare transactions, a recent survey from Merrill Corporation showed.
The survey of more than 200 professionals from the Americas, Europe, Middle East, and Africa found that 35 percent of respondents think political uncertainty has the greatest chances of sinking healthcare M&A deals in the next year, followed by:
- Investor confidence (22 percent)
- Data privacy (21 percent)
- Antitrust and competition (14 percent)
- National security regulations (6 percent)
“The healthcare landscape is becoming increasingly difficult for dealmakers to navigate, as the US enters a major election season and questions still surround the details of Brexit,” said Rusty Wiley, Merrill Corporation CEO. “On top of this, the healthcare industry is still grappling with how to operationalize and protect vast amounts of data, as well as how to attract the technology talent needed to capture that opportunity.”
In fact, 35 percent of healthcare M&A professionals agreed that talent assessment is currently the greatest hurdle for healthcare or life science deals.
Another 22 percent of respondents said data privacy and compliance is the top challenge for healthcare and life science deals right now, followed by regulation communication with 16 percent of respondents.
In terms of due diligence, healthcare M&A professionals found that identifying all the potential factors that could sink a deal is the hardest part of healthcare M&A. Over half of respondents (57 percent) said finding all the red flags is the greatest due diligence challenge, while 16 percent said it is predicting buyer interest and 12 percent said it is data security and control.
Despite facing serious challenges with healthcare M&A deals, professionals are confident mergers and acquisitions in healthcare and life sciences will increase. Fifty-two percent of respondents agreed that the healthcare M&A market is moving in a positive direction.
“This aligns with the steady stream of transaction activity we are seeing from our healthcare and life sciences clients,” said Wiley. “The number of projects we are managing is up almost 12 percent compared to the same time last year. The shift to a technology-based business environment is pushing life sciences and healthcare companies to acquire or form partnerships to build better data and customer-centric capabilities.”
Health IT is the richest investment opportunity for healthcare M&A professionals. Forty-four percent said health IT is the next investment opportunity for healthcare M&A deals, while 22 percent said next generation sequencing, 20 percent said medical marijuana, and 19 percent said both point-of-care delivery and immunotherapy.
Technology has the potential to significantly advance patient care as the industry moves toward more consumer-centric and value-based care. Twenty-five percent of respondents stated that health IT will drive the most opportunity in population and precision medicine.
Health IT will also impact diagnostics and devices (24 percent), biosensors and trackers (20 percent), telehealth (18 percent), and infrastructure and operations (10 percent).
While health IT has the potential to influence healthcare M&A deals, 40 percent of respondents agreed that data connectivity will be a problem for harnessing the technology opportunity.
Twenty-three percent also said healthcare collaboration will be a challenge for technology, while 14 percent cited lack of user experience focus, 12 percent cited technology-as-a-cost-center, and 10 percent cited the technology talent gap as obstacles to harnessing the technology opportunity.
Technology and value-based care are driving healthcare M&A deals. Providers are rapidly forming new strategic partnerships in order to get access to data from across the care continuum. Using technology and data analytics, providers aim to improve care quality and lower costs by preventing costly, avoidable events, like hospital readmissions, and influencing where and when patients receive care.
Even though Democrats and Republicans are debating what healthcare should look like and taking action to reform the system, providers are likely to continue forming strategic partnerships given the evolution of healthcare from fee-for-service to consumer-centric, data-driven value-based care.
