Top 3 Trends Driving This Era Of Hyperactive Mergers & Acquisitions

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It seems as if almost every other week a new healthcare megamerger is announced that is supposed to transform the industry.

From Walmart-Humana to CVS-Aetna – to the recent announcement in the Dallas market around Baylor, Scott & White and Memorial Hermann – the continuous message is that disruption has arrived and the walls of traditional M&A are falling down. Last year, there were 579 deals for U.S. healthcare targets, the second highest total on record. Why is healthcare M&A so hot?

In the healthcare industry, companies are using M&A as a strategy to adapt and respond to a rapidly changing industry environment. Faced with a shifting technological landscape, they are looking for outside expertise and systems to remain competitive. And in private equity, which is investing in healthcare at a rapid rate, attractive margins and profitability are driving them to certain healthcare sub-sectors.

A recent survey of 100 healthcare M&A dealmakers uncovered several insights to understand what’s going on in this market. These are the top trends.

1. Economic conditions are ripe for M&A, but attractive healthcare targets are scarce

A strong economy and low interest rates have significantly improved access to capital. Many companies have paid down debt, stockpiled cash, and are now in a position to spend. From a dry powder position, conditions are ideal for healthcare organizations to evolve through acquisitions, though increased access to capital has created more competition and pushed multiples to all-time highs.

As a result, the shortage of financially attractive acquisition targets is currently the biggest challenge in healthcare M&A. These challenges – high valuations, excessive competition and short timelines for due diligence – have created a seller’s market. The dearth of acquisition targets is further exacerbated by the fact that there simply aren’t many healthcare companies with updated technology/IT systems and additional investment must be factored into the deal model.

2. Heightened competition and prices are spurring healthcare companies to joint ventures

Amid heightened competition and pace of transformation, healthcare companies are turning to joint ventures and alliances to expand into new markets and grow top-line revenue more quickly — and with less hassle than pure M&A. An overwhelming majority of our respondents (79 percent) told us they expect to pursue alliances, partnerships, and joint ventures in the next 12 to 18 months.

While alliances come with their own set of challenges, they allow organizations to realize value earlier by avoiding some of the incredibly challenging and time-consuming aspects of M&A deals, such as fully integrating infrastructures, cultures, and technology. JVs can also be a means of accessing new technology. The most prominent benefits of partnerships and joint ventures, respondents told us, is the opportunity to access outside technology or expertise (57 percent said this). In a world that increasingly favors a digital-first approach, quicker access to new technology could be game-changing for some organizations.

3. Technology is both complicating things and presenting new opportunities

Technology has emerged as one of the central forces – if not the most important force of all – shaping acquirers’ M&A strategies in healthcare. An overwhelming majority of our survey respondents, 93 percent, say technology and systems integration challenges are creating added complexity in the healthcare industry. Also, more than a third of our survey respondents (36 percent) said the fast pace of technological change would pose the greatest challenge to healthcare companies over the next one to three years.

In the context of M&A, this raises the importance of technology and digital due diligence in the targeting phase and makes it critical to plan how acquired companies will be able to adapt, or disrupt, using technology going forward.

To be sure, buyers said they are looking for acquisitions capable of evolving with the rapidly shifting environment – or, those capable of proactively transforming that environment themselves. In that sense, the emergence of new digital tools is seen as a prime opportunity: 48 percent of respondents said one of their top two strategic drivers for making healthcare acquisitions was the chance to disrupt incumbents using technology. And healthcare IT was the subsector most likely to be invested in, prioritized ahead of providers, staffing, and even home health.

A wide range of technologies is seen as having potential to advance the industry. Among our survey respondents, the technologies deemed most attractive were mobile tools (49 percent), data analytics capabilities (37 percent), and the use of blockchain (30 percent). Wearables, sensors and trackers (25 percent), and telehealth tools (20 percent) – all of which intersect with the mobile space – are also drawing interest.

Conclusion

Technology comes with its fair share of challenges, especially integration in a healthcare setting. But it can also fuel an organization’s competitiveness and ability to adapt to disruption in the future. Read the full report, “Reshaping Healthcare M&A: How Competition & Technology are Changing the Game,” to access the complete findings.

 

Source: DBJ

We May Have Lost Amazon, But Biotech Could Be Dallas’ Next Big Move

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While no doubt a disappointment, Amazon’s decision to locate its second headquarters in New York and Virginia doesn’t diminish the economic vitality of North Texas. In fact, Dallas’ strong showing in the company’s high-profile national search bolsters our reputation as an attractive region for business.

Now, as we take stock of the Amazon decision and explore new ways to grow the local economy, let’s consider the potential of an untapped community asset: biotechnology.

Dallas is well-known for its oil industry, corporate headquarters, and technology startups. But did you know that the science behind some of the best-selling prescription drugs of all time was developed here?

Nobel Prize-winning discoveries made by Drs. Michael Brown and Joseph Goldstein at UT Southwestern Medical Center three decades ago led to cholesterol-lowering statin drugs that have revolutionized cardiac care. Tens of millions of adults worldwide now take statins to control their cholesterol, generating annual sales that reached $19 billion in 2017.

The success of statin drugs illustrates the economic potential of biomedical research underway in Dallas. At UT Southwestern, scientists continue to turn out discoveries that could lead to the wonder drugs of tomorrow, such as gene therapies for deadly diseases or treatments for Alzheimer’s. These research programs represent commercial opportunities that could add jobs and wealth to our community – if we provide financial and business support to grow this vital industry.

Two weeks ago, the promise of biotech was on display as about 500 entrepreneurs, researchers, and investors from around the country came to Dallas for an annual investment conference sponsored by the U.S. Department of Health and Human Services and the National Institutes of Health. The event, held annually to promote two government programs that provide early stage funding to startups, marked the first time the conference was held in the Southwest – a nod to our state’s star potential in the biotech industry.

In Dallas-Fort Worth, we have the pieces in place to attract and grow biotech jobs. The same factors that have made DFW attractive to companies like Amazon and Toyota – a world-class airport, an educated workforce, access to capital, low taxes, business-friendly government, and ample real estate – are also attractive to life science ventures. Additionally, our cluster of higher-education institutions – UT Southwestern, UT Dallas, UT Arlington, SMU, TCU, and the UNT Health Science Center – is expanding its investment in scientific research and generating more discoveries that can be translated into products.

UT Southwestern alone spends about $450 million a year on research and ranks fifth in the world for its impact on inventions, as measured by the number of research articles cited in patent applications.

Despite these strengths, Dallas-Fort Worth lags in this growing economic sector. While local labs have spawned successful companies such as Reata Pharmaceuticals and Peloton Therapeutics, biotech remains a small part of the North Texas economy. And there have been missed opportunities. Unfortunately, most of the capital raised by local biotech startups comes from the coasts, leading those companies to move to Boston or California where backers can keep a close eye on their investments.

Our universities, incubators, and accelerators, along with bionorthTX, a regional organization for the life sciences industry, are eager to push the ball forward. How? By marshaling resources to promote our region; getting help from government entities to attract biotech firms and major drug companies; and persuading sponsors, partners, and financial backers that their support is needed.

Dallas will certainly compete in the future for more major corporate expansions like Amazon. But in the meantime, let’s capitalize on our local scientific know-how. By working together, we can make Dallas a new hub for the biotech industry and further enrich the North Texas economy.

 

Source:  D Magazine

How Healthcare Adds Value To Mixed-Use Developments

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When it comes to location identification for development, you have to think creatively. In a highly competitive market like Milwaukee, mixed-use projects offer a great opportunity to showcase creativity, take advantage of complementary uses and drive tremendous value for clients and investors.

The success of a mixed-use project lies in location. A high-profile location will help attract businesses, which then helps build traffic. Ideally, you want to think outside the box to generate repeat visits with businesses that will help sustain that traffic. An innovative mix of retail, restaurant, hospitality, office and even healthcare can greatly enhance a development.

Mixed-use retail developments create new opportunities for healthcare projects. Health systems and physician practices are choosing to prioritize locations they may not have previously considered. There’s been a significant expansion of and increased focus on the outpatient ambulatory environment. The trend of developing specialty outpatient facilities, ambulatory surgery centers and micro-hospitals continues to gain momentum and allows for expansion to remain competitive while maintaining efficiency.

An outpatient facility brings traffic. Finding a high-visibility location where customers are already engaging increases the convenience factor. Built-in traffic drivers like restaurants and retail help with trip assurance. For example, after wrapping up a clinic appointment, you can stop for food, or pick up something at a retail store. Zeroing in on what the consumer wants and then making it easy for them to achieve that is the key to success. 

Case study: ProHealth Care 

ProHealth Care, a community-based healthcare system in Waukesha County in southeastern Wisconsin, approached Irgens for a new project in the Milwaukee suburb of Brookfield. ProHealth Care offers a full range of services from primary care and specialty care, hospital care, rehabilitation care, home and hospice care to fitness and wellness services. The company had a previously under-performing site, and after learning more about the goals for this new development, Irgens presented them with an alternate opportunity at The Corridor.

The Corridor is a 66-acre, horizontal mixed-use project that includes retail, restaurants, hospitality, healthcare, office and fitness and wellness space. The location offers great visibility from I-94 in a heavily trafficked area in Brookfield. 

Irgens brought this project to ProHealth to help reposition its services from a lower profile and less-valuable location to a highly sought-after retail corridor in a richly developed demographic market. The strategically important location made sense, and ProHealth Care took advantage of the opportunity. The Corridor offered a high-profile site with multiple access points. A number of growing and first-to-market businesses chose to locate there, including Dick’s Sporting Goods, Portillo’s and Life Time Fitness.

Irgens moved quickly on the 50,000-square-foot building for ProHealth Medical Group at The Corridor. Immediately following lease signing, Irgens completed the building design and expedited the entitlement process to bring the project to occupancy within 11 months. Securing the site and getting ProHealth to market quickly gave the company a competitive advantage.

Consumers expect to find healthcare delivered in a more convenient location. If it’s not convenient, consumers will not engage because they make decisions based on ease. Health systems are beginning to understand this. 

Successful healthcare development through strategic and trusted relationships will serve companies well. Irgens has developed several projects with ProHealth Care over the years. Trust was an important factor in having ProHealth Care consider the opportunity at The Corridor and immediately recognize its value.

Successful real estate developments are close to where people live, work and play. Proximity to mass transit and other amenities like grocery and retail stores are key factors to that success. Healthcare plays into this as well, becoming another key element for a quality mixed-use development, positioning an organization in a new area to create a new avenue for care delivery in a convenient, consumer-oriented setting.

 

Source:  RE Business