November 15, 2017
By Angus Buchanan, Principal, PwC’s Deals Practice
It’s no secret the healthcare market has undergone a wave of M&A activity over the past decade as service providers seek to remain competitive in an environment of regulatory changes, reimbursement pressures, increasing costs, and the disruptive force of new entrants and technologies.
While the complexities of healthcare deals can make execution challenging for management teams, the opportunity to create significant value can make the challenge worth it. But if a company overpays and under delivers on deal value creation, the economic impact can be profound given the variety of other ways management could have invested those dollars (e.g., expanding service lines, updating equipment, facility improvements etc.).
So realizing synergies is critical, and we have found this occurs in three main stages based on ease of execution. First are the cost-based operational efficiencies over which an organization has the most control. Next are the revenue and growth targets based on service capabilities and market positioning. Finally, the more significant structural enhancements and fundamental strategic re-positioning that help a company differentiate itself, take advantage of changes in the marketplace, and improve competitive footing. Our analysis indicates these three areas combined can enable healthcare organizations to capture deal value.
For a more detailed look at these three stages and how to adapt them to the unique characteristics of each deal, please see our full report, Capturing deal value in Healthcare Services.