The market for mergers and acquisitions in the healthcare industry appears to be in flux. After a slow start to 2022, revenue from healthcare M&A activity in the second quarter of 2022 hit a record high of $19.2 billion. KPMG reports that technology plays a major role in these deals and states that many are “focused on acquiring digital capabilities, such as digital care and cloud-based platforms.”
M&A activity results in some significant challenges for IT departments. These teams must be aware of these challenges, as observers predict that mergers and acquisitions are unlikely to decline in the coming months. In fact, according to a 2022 report from Deloitte, many business leaders expect the number of mergers and acquisitions to grow in the near future. Deloitte reports that 92 percent of executives expect M&A volume to increase or stay the same in the coming year.
“Many of the acquisitions that we’re seeing have been smaller acquisitions, which often means that a company is looking for a specific capability,” says Michael Bock, sales director for CDW.
As healthcare organizations deal with M&A activity, they should pay close attention to IT issues. A smooth IT integration is an important step toward a successful merger or acquisition. This requires organizations to establish strategic plans that set up the integration of data, cloud platforms and personnel and also address security concerns, among other elements.
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Key Objectives for a Successful Healthcare M&A
Many organizations engaged in mergers or acquisitions are looking to take advantage of economies of scale or grow their talent pools in specific capabilities, says Matt Varin, a senior services manager with CDW.
“It’s often easier and more cost-effective to go out and acquire talent versus building internally,” Varin says. “Talent is hard to track down, so doing an acquisition gives you a chance to acquire that talent at scale.”
As healthcare organizations engage in M&A activity, Varin advises, they should avoid making technology an afterthought. Instead, they should map out a plan for the transaction. This should include the objectives of the activity and the steps needed to achieve them, with specific but reasonable deadlines that IT teams can work toward as the transaction moves forward.
The Importance of Integration in Healthcare M&As
One of the key objectives of any M&A strategic plan should be to integrate data and technology platforms between the merging organizations. “If you’re not able to get fully integrated and engage in the data sharing and knowledge sharing that this enables, you’re not going to achieve the synergies that are the ultimate value companies are looking for in an M&A,” Varin says. “Merging companies need to make sure there is good collaboration and that they are able to share ideas and data across the new organization.”
Cloud computing solutions have become powerful tools for achieving this objective. Platforms such as Microsoft Azure, Amazon Web Services and Google Cloud make it easier to centralize information that is involved in a merger or acquisition, Bock says. This makes the cloud a more attractive option in many cases than standardizing on an on-premises solution. “Cloud platforms have taken center stage because they’re much more agile and flexible,” he says.
Further, cloud platforms enable employees of a merged company to access enterprise data from anywhere they have an internet connection, which supports clinical mobility initiatives that have gained momentum in recent years.
Security Remains a Major Concern for M&A Activity
A focus on security is essential to successful M&A integration, especially in an industry such as healthcare, which is a primary target for cyberthreats. Cyberattacks represent a massive problem for hospitals and can even compromise patient care, which has made security a top concern as IT teams look to integrate systems.
As organizations consider M&A activity, they need to pay special attention to issues such as risk assessments, patch management, multifactor authentication, single sign-on and network segmentation. A security audit is a critical step, Varin says, so IT teams can identify security vulnerabilities before they begin integration efforts.
Ultimately, healthcare organizations that plan their transitions and execute them effectively will give themselves a better chance to achieve M&A success.