Over the past decade, merger and acquisition (M&A) activity in the health and human services (HHS) space has become more commonplace. In 2018, Healthcare Finance reported that HHS M&A deals were up 14% over the prior year and many of the industry’s leaders expected that upward trend to continue throughout 2020—and well beyond. However, what these executives did not anticipate was a pandemic that would send shock waves throughout the HHS world.
As the crisis unfolded, some people in the industry predicted M&A activity among health and human services organizations would decline, and possibly come to a full stop for a while. But this is not what happened. The pandemic had significant financial and systemic effects on HHS providers, which only strengthened these organizations’ rationale and resolve to partner up through merger and acquisition deals. The number of mergers and acquisitions in the health and human services space has continued to rise, and in 2021, all previous M&A milestones were obliterated, with deal activity increasing by 56% versus the prior year.
There are no signs that this M&A trend will be slowing down anytime soon. Many HHS organizations across the industry are in hot pursuit of opportunities to merge or be acquired. These providers’ goals for a merger or acquisition vary widely, from reshaping programs and better serving participants to gaining more scale to deal with situations, like a pandemic, in the future. However, the fundamental challenges they are likely to encounter in any deal are very much the same.
The Fred C. Church team has worked side by side with many nonprofit and human services providers as they’ve navigated a merger or acquisition process. Based on decades of collaborations with organizations like yours, we have accrued numerous insights about M&A transactions, including what has fueled and will likely continue to fuel these deals as well as how to manage both the new and ongoing risks of these activities.
If your organization is looking to acquire another health and human services provider or seeking to be acquired, you can tap into our knowledge and experience by downloading our complimentary white paper, Mergers and Acquisitions in Health and Human Services: Good Business or Risky Business? Use this information to gain a deeper understanding of the HHS M&A environment you are venturing into, including:
- How to recognize the situations that may influence an HHS firm to be open to an acquisition or to acquiring other firms.
- Why the majority of M&A talks break down and how to avoid several common setbacks.
- What main risks and challenges are inherent in practically any merger or acquisition initiative and how to overcome them.
Given that the failure rate for M&A initiatives is 70% to 90%, the odds of success are generally low. Achieving a smooth transition has become even more challenging since the pandemic. However, utilizing an experienced insurance broker and risk resource, like Fred C. Church, that can assist you with doing your due diligence in executing this complex process may just help you beat the odds.