Transacting – a healthy growth strategy

By Mark Harrison - March 15, 2018

While there is constant comment on the challenges of care sector participants; budgetary constraints, excess demand, disruption (tech or policy) and numerous other aspects, few acknowledge that as a sector there is a healthy bottom line.

Read: Is your safety culture dysfunctional?

The recently released Pitcher Partners Mid-Market M&A report emphasises the sector’s robust health. Put simply, deal activity is up, and expected to continue in 2018.

The survey of M&A specialists identified strong growth in transaction volume during 2017 across the pharma, medical and bio tech sector.

The survey identified the key drivers for transaction volumes, which all ring true for the care sector, as:

  • Organisations seeking growth by acquisition –acquiring new customers, or expanding geographies (for the same outcome) is a key motivator for transactions rather than simply evolving organically. Shareholders, funders (public and private), and other stakeholders regularly state the need for growth, motivating organisations to look beyond their existing environment to meet these demands.
  • Being opportunistic in a fragmented sector. Could a sector be more fragmented, particularly in the mid-market, than the care sector? The sheer number of organisations in the sector, the increasing corporatisation of participants, the rate of disruption or change is motivating many organisations to transact and there are numerous counter parties to choose from.
  • Seeking economies of scale. Efficiency, leverage, synergy are all key in the sector. A stable, efficient and effective ‘back off’ can support numerous client facing practitioners, and accordingly organisational management are being loaded up.
  • Beyond these, M&A has been cited as the solution for obtaining skilled people, new technology and IP. Key drivers in the care sector.

Looking forward to the balance of 2018, 92% of survey respondents expect continuing growth of mid-market M&A activity in the pharma, medical and bio tech sector. The macro and organisational specific factors identified above will continue to drive this activity, but interestingly, the suitors for organisations are expected to come from far and wide. Increasingly transactions in Australia involve an international counterpart, most likely from the USA, China and Japan.

So what does all this mean for you, the reader? For those not contemplating a transaction, be aware of the broader environment your organisation operates in and watch for threats and opportunities. Perhaps a transaction is a means to protect your organisation from a threat or capitalise on an opportunity. For those organisations proactively watching and waiting, be transaction ready. As an acquirer or vendor there is much work that can be done to obtain the best outcome possible when the time comes, and in such a high demand, disrupted (tech and policy), and fragmented sector, for most it is only question of when.

For the full report, click here.

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