By Amanda Baethke
Due to rising costs and falling reimbursement rates, many healthcare companies are looking to sell their businesses or partner with others to exit the market or increase profitability.
Mergers and acquisitions are tools that can help businesses grow in trending areas of care, refocus resources in other areas or leave the market. Before considering M&A, there are steps you can take to make your business more attractive, whether you’re the seller or buyer.
Buyer and seller trends for mergers and acquisitions
One of the largest factors leading to increased M&A activity in the healthcare sector is rising healthcare costs and continual reimbursement cuts. Durable medical equipment providers (DMEs) must be able to cover medical equipment provided to patients until they are reimbursed by those patients’ insurance providers. As rates are cut, it becomes more difficult for DMEs to cover the advanced and modern equipment that patients need.
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One solution is exiting the market and allowing a buyer to pick up new lines of business to increase their profit. It can also benefit companies to sell one particular line of business or merge with a partner to add capital, as well as to improve operations to more effectively compete in particular healthcare sectors.
Not only will the seller gain the capital needed to refocus their goals, but they may also gain access to stronger customer bases in areas outside of their local reach. By expanding into more regions, they can create momentum toward expansion into more areas.
How to look as a seller
Growing your product line — In seeking expertise to make certain business lines more profitable, look for another business to partner with proven success in their region. First and foremost, they should be able to assist with marketing your line. Examine your margins to see how much you can lower your price while maintaining a profit, and streamline operations and management costs by simplifying processes to involve fewer resources.
Finding a good partner — When it comes to merging with another business, not just any partner will do. Finding the right partner is critical for success. Look for a partner with the same passion for helping patients as you have, and make sure your vision and goals align so you can develop a successful strategy together.
It helps if your partner has an established network to enhance your growth and reduce prices to increase your margins. Experience, especially in mergers and acquisitions, is another important factor in understanding risk assessment and cost minimization on your product line. If they have partnered with other businesses, they may be able to streamline the transition for particular products without any equipment or resupply delays for patients.