The healthcare sector is facing tumultuous times in 2020. With the widespread COVID-19 pandemic, major business operations are disrupted, hospitals are overloaded, medical professionals are overworked, and healthcare institutions’ boards attempt to maintain normalcy. Healthcare M&A is one such crucial segment of the healthcare sector that was nearly brought to a screeching halt in the second quarter of 2020.
An increasing number of cases in North American countries and some parts of Europe and APAC have worsened the state of economies and industries. Although the healthcare and pharmaceutical industries have devoted their time and effort to the COVID-19 pandemic, the world is still a long way from a vaccine or normalcy of any kind. Consequently, this poses a challenge for the aforementioned hospitals, medical professionals, and healthcare institutions’ boards.
Currently, healthcare institutions are in the midst of a crisis with no clear ending. While investor support has increased due to the increasing need for healthcare globally, social and political unrest, struggling economies, and volatility in financial markets are testing the healthcare industry. Healthcare M&A may be one of the most effective solutions to this crisis.
In this article, Infiniti’s M&A support team has detailed the impact of the COVID-19 crisis on healthcare M&A, positive factors influencing the recovery of healthcare M&A, and the importance of M&A support.
The COVID-19 crisis has severely impacted healthcare M&A. To learn the business implications of COVID-19 on healthcare M&A, speak to our industry experts.
The Impact of COVID-19 on Healthcare M&A
The COVID-19 pandemic has taken a substantial toll on developing healthcare mergers and ongoing healthcare M&A deals. Infiniti’s experts identified the following three major challenges that healthcare institutions can expect to impact the healthcare M&A process:
Nationwide lockdowns in countries, including the United States, New Zealand, and the United Kingdom, has caused a severe delay in acquiring regulatory clearance. With all operations on hold, government bodies focusing on COVID-19 related issues, and professionals being forced to work from home, all-important regulatory approval processes have been on hold. However, companies can fast track their M&A processes by ensuring other parts of the process have been completed before the situation normalizes.
The impact of COVID-19 on healthcare M&A participants in ongoing deals will potentially change both the buyer and the seller’s valuation. This may lead to the collapse of previous deals or the need for re-valuation of both parties. Revision of the purchase price and financial statements accounting for the COVID-19 impact may help fast-track this process. However, this may still impact potential or ongoing healthcare mergers due to the continuing effects of COVID-19 and an unclear deadline on the crisis.
Due Diligence and Third-Party Approval
Healthcare M&A requires rigorous due diligence from both parties involved. Due to the lockdowns, new safety and hygiene protocols, and the need for social distancing, this process has been delayed, if not stopped. Additionally, both parties may request another round of thorough due diligence in the case of ongoing mergers. Further, third party activities such as audits, on-site visits, and inspections will be delayed, slowing down the M&A process for healthcare institutions.
Understanding the challenges of healthcare M&A is the first step towards successful mergers for healthcare companies. To gain a more comprehensive understanding of the challenges and how your organization can tackle them, request more information.
The Path to Recovery
The world is working towards recovery, pharmaceutical, and healthcare sectors worldwide are attempting to develop a vaccine. Simultaneously, governments are taking initiatives and providing support to industries to reduce the COVID-19 crisis’s impact. However, this process is expected to be slow and long-drawn. Therefore, Infiniti’s experts have highlighted the following two minor factors positively impacting healthcare M&A:
- The hospital segment, innovation-focused biotech stocks, and large pharma companies may see a surge in valuation due to the high dependence on hospitals and the ongoing work to find a vaccine. This may encourage multiple buy-outs and influence extremely attractive valuations.
- The capital position of private equity firms is expected to provide them with the opportunity to assess and capture resilient assets shortly.
Although there are limited positive factors influencing healthcare M&A currently, increasing demand for healthcare services and relatively minimal disruptions may fuel growth in this space. However, companies must evaluate their M&A partners and enter into healthcare mergers cautiously in these challenging times.
Importance of M&A Support during the Healthcare M&A Process
The recovering healthcare M&A sector has yet to face various challenges posed by the jarring COVID-19 crisis. As companies continue, plan, or complete deals, they must evaluate all potential risks and gain a comprehensive understanding of their partners. Infiniti’s M&A support solutions enable companies to identify, assess, and prepare for all the factors that influence any healthcare M&A.
Infiniti’s M&A support also provides healthcare companies with the following:
- Assistance with identifying ideal partnerships and potentially beneficial mergers
- Expert insights into appropriate valuation and important decisions regarding transactions and investments
- A comprehensive understanding of every stage and process in the healthcare M&A process
- Data-drive insights that also account for the changing landscape and current competitive scenario of the healthcare industry
Infiniti’s M & A support experts can help companies tackle the challenges caused by the COVID-19 pandemic and identify and evaluate the risks involved in potential deals. This will enable companies to stay a step ahead of competitors, identify and assess ideal opportunities, and keep abreast of all factors influencing the healthcare M&A process.
Leveraging Infiniti’s M&A support solutions can help identify the ideal partnership, maintain business continuity through the COVID-19, and overcome the business implications of this crisis. Request a FREE proposal to learn more about the value of M&A support solutions in the recovering healthcare M&A space.