The ACA and Healthcare Industry M&A: What You Need to Know

The Affordable Care Act still is impacting the healthcare industry, affecting players of all sizes from doctors’ offices, hospitals and medical device companies to large pharmaceuticals.

Mergers and acquisitions in the healthcare sector have doubled over the same period in 2014. According to Reuters data through April 24, a wave of mergers produced $193.9 billion in announced deals as drug manufacturers looked to restock their pipelines with generic pharmaceuticals.

According to the KPMG 2015 M&A Outlook, 84 percent of executives surveyed expect the Affordable Care Act to drive “significant” activity in healthcare, pharmaceuticals, and life sciences.

In the middle market, dealmakers are also expecting healthcare to skyrocket over the next 12 months. Executives cited consumer confidence, uptick in actionable leads, and urgency to close deals before a potential rise in interest rates.

Despite the wave of activity, not all of the announced deals are being executed.  Mylan has strongly rejected Teva’s $40 billion takeover bid, while Perrigo has rejected Mylan’s increased takeover mid of $33 billion.

The excitement is not limited to M&A deal-making alone. Investors also see opportunities in the industry. According to Pitchbook data, venture capital invested in the healthcare industry rose from $8.6 billion in 2010 to $13.1 billion in 2014.

Will Healthcare M&A Affect Me?

The short answer is yes.

Whether your business is directly involved in the industry or serves an adjacent market, the current wave of transactions is transforming the healthcare sector. These changes present new opportunities and challenges. We’ve found some of our clients in this space are growing at astonishing rates while others have hit roadblocks as they navigate the new regulatory and political environment.

Regardless of your situation you cannot expect to go about business as usual. If you’re involved in this space, be aware of market moves and take a close look at your business’s strategic plan.

What Should You Do?

Remain proactive and seek out opportunities for growth – either organically or externally. When thinking about your strategic plan, here are some pointers:

  • Consider future demand – What will your customers want in one, two, and/or five years? How will you fulfill this need? You may anticipate a demand in the next five years and begin internally developing a new product or service. Or you may acquire a new technology to rapidly fulfill a need. Perhaps you will pursue both strategies.
  • Adapt to changing market dynamics – How will the regulatory changes and political developments affect you? Where are new opportunities and how can you take advantage of them? What new challenges do you now face and how will you overcome them?
  • Pay attention to M&A activity – Whether or not you plan to acquire you cannot afford to ignore what is happening in healthcare M&A. What effect will consolidation or other deals by competitors or suppliers have on your business? Are you prepared for these changes?
  • Move quickly! – Develop a strategic plan and be prepared to move swiftly to execute it. Don’t act impulsively, but don’t wait around too long or the opportunity may be gone.

While it is impossible to predict the exact effect of the Affordable Care Act and robust healthcare M&A on your business, you do have the ability to study your options and remain proactive. Now is an exciting time in the industry; there are many opportunities for growth. Pursue them!

Explore your options for growth with the following tool. Download your free copy of the tool today. 

Finding Opportunities for Growth: The Opportunity Matrix


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