Successfully Navigating the Traffic on Healthcare M&A Transactions

May 01, 2020

The year 2019 brought increased M&A activity in sectors such as behavioral health, healthcare IT, and post-acute care. The industry saw some slowdown in home health M&A, but diverted investment in hospice.

Buyers are being more selective about which organizations they choose to acquire, both in the for-profit and not-for-profit space. The industry is seeing more hospitals and health systems are entering into informal partnerships and/or considering regional alliances or consolidations.

Hospital systems continue to use M&A as a tool to better coordinate care, expand the scope of services to patients, and reduce challenging administrative burdens. And private equity firms continue to inject capital into the healthcare industry.

New partnerships in the industry could result later this year as healthcare organizations look for the best way to improve consumer experiences.

When exploring healthcare M&A transactions, it is important to keep in mind:

  • Businesses in the healthcare industry are regulated by a wide array of federal and state laws enforced by various specialized regulatory agencies. Violation of these laws can subject parties to these healthcare transactions to onerous sanctions, including criminal penalties.
  • Not all healthcare targets are the same. It is very important that the team understands the business of the target.
  • Assemble a team of lawyers who are familiar with healthcare transactions, particularly a healthcare regulatory attorney as well as a corporate transactional attorney who is familiar with healthcare transactions. Because healthcare is such a highly regulated industry, all aspects of a transaction should be evaluated from a healthcare regulatory perspective.
  • Diligence in a healthcare transaction is very important. It helps mitigate risk for a buyer, and it will be necessary for a buyer to obtain financing or RWI coverage.
  • Certain healthcare transactions result in successor liability, regardless of how the transaction is structured.

This presentation was part of the Morgan Lewis M&A Academy webinar series. We invite you to subscribe to Morgan Lewis publications to receive updates on trends, legal developments, and other relevant areas.