Merge & Acquisition in the Healthcare Sector

"Merge & Acquisition in the healthcare sector"

Reasons, Pros & Cons, profitability for the companies, the consumers will receive benefits caused by those mergers? Is there a possibility for lay offs and job losses?

Mergers and acquisitions are tactical decisions that lead to the maximization of a company's growth by boosting its production and marketing operations. They have become popular in the recent times because of the enhanced competition, breaking of trade barriers, free flow of capital across countries and globalization of business. A number of reasons are attributed for the existence of mergers and acquisitions. For example, it is suggested that mergers and acquisition are intended to:

•Limit competition

•Utilize under-utilized market power

•Overcome the problem of slow growth and profitability in one's own industry •Achieve diversification

•Gain economies of scale and increase income with proportionately less investment  

In the most recent CIT Healthcare Outlook Study, a majority of healthcare executives surveyed predicted an increase in mergers and acquisitions activity. They have said that M&A activity is usually a good thing for all stakeholders, including the company, the industry as a whole, the general public and shareholders.

Patients might see an increase in new treatments and devices over time. That’s because bigger companies typically have more money to spend on developing treatments, and have more experience navigating the difficult process of getting products approved by regulators. But patients could also have fewer doctor and hospital options as companies combine to lower costs.

Several U.S. pharmaceutical, biotech and medical device companies have been trying to acquire overseas competitors, allowing them to move their headquarters to a country with a lower tax rate. The deals also give the buyer access to billions in overseas profits to invest in research and development, without having to bring those profits back to the U.S. and pay taxes on them.

Mergers tend to boost share prices in general. That’s because the acquiring company typically pays a premium over the market value of the target stock to ensure that the deal wins approval from shareholders.  Larger healthcare systems can also afford the IT investments required to achieve compliance as well as the facility investments required to attract high-value consumers

For employees, the mergers could mean some job losses in areas such as administration and sales, but not in research at drug makers. Losses at health care providers would be minimal, since this sector is highly demanded.

The mergers and acquisitions are creating ripple effect in various areas of the healthcare sector and have a direct impact on the country’s economy. Obviously, a number of factors lead to the mergers and acquisitions and it is believed that the continuation of these factors will apparently make 2015 another record year in health mergers and acquisitions.