Provider services and solutions

Managing hospital M&A strategies: Phase I due diligence

The challenge

The healthcare landscape is constantly shifting and companies with successful M&A strategies adapt their strategy and approach to accommodate these shifts. The impact of health reform legislation, regulatory and reimbursement changes, and converging health technologies force the corporate or financial buyer to consider a wide array of opportunities and risks in any potential transaction. Enterprise value, cash flow, and capital access may change dramatically in the highly regulated and dynamic segments of the healthcare industry. In addition, many buyout targets may be facing distressed situations with the threat of bankruptcy, underfunded pension liabilities, significant capital needs or labor shortages. Successfully assessing the current performance, assets, and liabilities of such acquisition candidates requires a deep understanding of the industry and the shifts taking place in the market.

How we can help you

On any given transaction, we focus our diligence on those areas that have the most impact on deal value. By leveraging our industry and transaction experience to uncover hidden opportunities, risks, and deal issues, we assist you with your assessment of an organization with industry-specific analyses that drive your financial forecast and assessment of enterprise value. We tailor our approach to integrate with your organization's resources and timeline to provide timely, focused, and relevant information. Most importantly, our healthcare due diligence team is comprised of seasoned, industry specialists who are focused on such transactions.

Common services include

Depending on the specific needs of each deal, our team of professionals works closely with your deal team to assess the:

• Historical quality of reported earnings with a bridge to forecasted performance
• Working capital and future capital expenditure requirements
• Investment hypothesis, deal issues, key risk factors and their potential impact on valuation
• Internal control environment
• New facility, service, or product introductions and related earnings streams
• Efficiency and quality of services
• Information technology environment and potential investment needs
• Compliance environment and related exposures
• Impact of pension liabilities, compensation structures and benefits programs
• Adequacy of self-insured loss reserves and risk management program
• Tax posture of target, including tax structure, exposures and effective tax rates