The health IT M&A era is coming. Are you ready?
The following is a guest post from Angela Pierce, CFO at AirStrip.
Health IT mergers and acquisitions are now quickly gaining traction. While there are many reasons for this, a driving force is the shift from fee-for-service to value-based care.
Providers want and need innovative health IT tools to meet today’s demands for high-quality care, but roadblocks prevent the seamless integration and use of these tools. The most critical offender is the lack of interoperability. Provider frustrations over this lack of coordination and adaptability will peak in 2019, and vendors will feel the brunt of this challenge. The result will be a surge in health IT mergers and acquisitions with the aim of maximizing innovation while enhancing integration.
As the era of health IT M&As approaches, the time is now for companies to prepare. Virtually any company could find itself wrapped into the complexities of one of these deals. Whether the potential acquirer or acquisition target, big or small, public or private, health IT companies need to prepare well in advance for M&As and keep the following in mind.
For the Survivors (aka the Acquirers):
- Leverage an outside expert. It is OK to admit you don’t know everything. Tap trusted outside experts to ask questions about the type of technology you’re trying to acquire. It’s helpful to learn as much as possible about the technology, including how it compares to competitors and its potential for success or failure, so you can make a better informed decision on whether the technology would be a good fit within your organization. Plus, it will show your prospects that you know what you’re talking about.
- Lean on your tech team. While outside expertise is important, don’t forget to go to the people who are right under your nose. Your own tech team is an excellent resource to provide on-the-fly answers to any knowledge gaps you may have on the technology and they have the ability to provide additional insights and ideas you may not have thought of based on your different backgrounds and perspectives. Ask your engineering lead to estimate the time and capital required to integrate the technology you are interested in acquiring, and build it into your business plan.
- Look at the facts. Many companies are overhyped these days, with their talk outshining their tech. Don’t get blinded and fall into this trap. Make sure to dig deep and find factual evidence that supports your desire to acquire the company. Then, use this logic to plan an integration strategy prior to making any decisions – be realistic, not optimistic.
For the Innovators (aka the Acquirees):
- Own your strengths and weaknesses. Companies looking to acquire you are looking for technology that will make their existing portfolio even stronger. Focus on fully developing your company’s core technology solution and position, and make sure there is clear customer value. When it comes to weaknesses, be honest and open about your company’s challenges. If you can show the acquirer how they can improve or mitigate the weakness, it will make your exit opportunity stronger with them.
- Organize your financials. No one wants to acquire a company that will cost them more money after the fact. If you are not producing positive cash flow, curb your spending to focus on the necessities. For a start-up, this equates to focusing research and development on core technology, demonstrating dedication to the solution and showing potential acquirers the areas of your company that hold enough value for investment.
- Oblige potential acquirers. While this may seem obvious, it’s important to please potential acquirers, not pick fights with them. The acquiring company should think they can do a better job at running the company – after all, they are acquiring the technology to make it even more powerful and effective. Be proud of what you’ve created, but don’t be defensive.
The health IT industry waits for no one. Companies that fail to prepare themselves now for the M&A era will be left in the dust, so it is critical for health IT vendors to develop plans and strategies internally to protect and advance their innovations down the road.
In addition, while the chaos and competitiveness of the situation might seem daunting at first, it is important to remember that M&As bring opportunity. These deals are meant to enhance technology innovation in healthcare and ultimately contribute to the improved health of the patient population. Therefore, if you find the right partner and make the right deal, it will be a home run for the future of healthcare.