Editor’s Note: Angela Pierce is the CPA, Chief Financial Officer at AirStrip, a complete, vendor- and data source-agnostic enterprise-wide clinical mobility solution, which enables clinicians to improve the health of individuals and populations. Pierce previously served as the CFO of Trillion Partners, Inc., where she spearheaded the effort to raise $60 million in debt and private equity for the business. As VP of Finance at Broadwing, Angela led the raising of more than $200 million and managed the company’s M&A activities and investor relations functions.
Over the past couple of years, there have been around 200 merger and acquisition (M&A) deals in the healthcare IT space, driven by high enterprise value and the sheer size of the industry. 49 deals came together in the first quarter of this year alone. These numbers make health IT the highest performing industry in terms of M&A activity in the consumer and retail space, and the second highest in the infrastructure/industrial space.
Between 2018 and 2019, we will see an insatiable need for increased health IT interoperability, with providers putting increased pressure on health IT vendors to deliver. This pressure – combined with the shift brought on by new regulations like MACRA around performance, measurement and outcomes – will drive one of the biggest M&A pushes we’ve seen in the health IT industry.
Whether a company is looking to acquire or be acquired, companies must be ready to make the right decisions for their investors, customers and employees. While the market is complex, the right preparation will put companies in the best position to be successful.
For those seeking to be acquired:
1. Focus on your specialty area.
Make sure your company’s core technology offering is well-developed with a clear value for customers. At the end of the day, those seeking to acquire want to see reliable technology that will take their current offerings to the next level.
2. Be able to explain your position.
Know your company’s technology in and out, and be able to explain what makes it valuable so that a 3rd grader understands the value (as opposed to your competitors’ solutions). If you can’t explain what you do, your technology loses credibility and value – even if it’s the best solution out there.
3. Get your financials in order.
No one wants to acquire a company that will cost them more money after the fact. However, if you’re not seeing a return on your investments, curb your spending to focus on the necessities. For a start-up, this equates to focusing research and development on core technology, demonstrating dedication to the solution and showing potential acquirers the areas of your company that hold enough value for investment.
4. Own your challenges.
Don’t be defensive about your company’s position in the market. Instead, go on the offense and own up to the challenges it currently faces. Not only does this show potential acquirers that you are well versed in your company’s strengths and weaknesses, but it also helps ensure that your company is acquired by someone confident they can overcome said challenges.
5. Don’t get competitive with potential acquirers.
No matter what, anyone who acquires you will always believe they can do a better job – and they should. They acquired your solution with a goal of making it even better.
For those looking to expand by acquiring technology:
1. Don’t fall in love too quickly with the other company.
Make sure your decision is based on a logical assessment of the company in question. Otherwise, you risk acquiring a company that is all talk and no tech, or worse – overpaying.
2. History repeats itself. Don’t believe the hype around a company – especially if they’re the ones hyping it up. Instead, look for concrete evidence that backs up your interest in making the acquisition, and have a solid strategy for integrating them into your company before making any decisions.
3. Ask for guidance.
Ask specific questions and engage with an outside expert you trust to help you learn all you can about the technology at hand, including its position in the market and potential for success or failure. This will help you better assess the technology, and show the company you’d like to acquire that you know your stuff.
4. Have a good tech team and ask a lot of questions.
Experienced tech professionals will give you a resource on-hand, particularly when meeting with the company. They will help fill any knowledge gaps and be able to think critically about the tech with a different, yet relevant perspective.
5. Get a feel for the culture.
The company’s culture is just as important as the company’s technology – and bad company culture will kill a good acquisition deal. The more difficult it is to integrate their company with yours, the more difficult it will be to benefit from their tech. Therefore, get to know the company and its employees in order to assess whether or not they align well with your company’s culture.
Finally, no matter which side of the aisle a company is on, never forget that an acquisition takes time. Don’t take the process of combining companies and technology lightly just to get a deal signed. In addition, the actual integration – of people, technology and processes – takes months after the ink is dry. Be patient and keep a positive attitude. In the end, strategically managed deals deliver the best possible outcomes for all stakeholders.