Industry flux leading players to change M&A approaches
Financial experts discussed health care consolidation and other M&A trends at a Nashville Health Care Council luncheon Wednesday, telling the audience that low interest rates and a changing industry environment are boosting activity.
Philip Pucciarelli, managing director and head of health care services at BMO Capital Markets, and Eb LeMAster, managing director of Ponder & Co., said health care companies are finding success with innovative deal structures.
“People are moving into different channels in different ways, like minority investments and joint ventures,” Pucciarelli said. “Take it slow and steady, and a little bit differently than buying everything up right away. Creative structures are winning the day.”
LeMaster used as an example the Vanderbilt Health Affiliated Network, which partners with hospitals and other providers across the state.
“Virtually every state has a model like that now,” he said. “Does that model have all the answers? We’ll see, but creative partnering is happening across the board.”
The panel also gave their picks for sectors with potential for further consolidation, saying the chronic care services, population health and post-acute care spaces were growing and would need additional technology and services to support them.
“It’s about aggregating assets that you think will be valuable in the way the market is moving, and to try and stay ahead of where the puck is moving,” Pucciarelli said.
Robert Crutchfield, general parter of Harbert Venture Partners, and Benjamin Edmands, managing partner and co-founder of Consonance Capital Partners, gave their advice to health care entrepreneurs looking to land venture capital funding.
“Understand what you’re getting,” Crutchfield said. “When you take venture capital, you’re diluting not only equity, but influence.”
Edmands said entrepreneurs need to develop a commonality of vision with their investors, but maintain enough perspective to recognize when that vision needs to change.
“Situations are fluid, you have to bob and weave,” Edmands said. “You’ve got to be able to change direction quickly and put the resources behind that.”
The panel also discussed the pending Supreme Court case of King v. Burwell, and said hospitals could see a significant financial impact if subsidies are stripped from states using the federal health insurance exchange.
“For hospital companies, a lot of it is priced into these stocks the reform will stay in place as it is,” LeMaster said. “I think there’s meaningful downside.”
But the group was generally in consensus that either way the Supreme Court rules, dropped subsidies will not unwind the major elements of health reform. Edmands noted that the Affordable Care Act was a catalyst for market changes that will likely remain in place, regardless of the legislation’s fate.