Health Business Group is a leading health care business consulting firm advising companies, non-profits and investors in health care services, health information technology, and pharmaceutical services. Our client service professionals average more than 15 years of health care strategy consulting, industry and start-up experience. We are passionate about helping our clients succeed.
Our sister company, MedPharma Partners, serves the pharmaceutical and medical device industries.
"Karen has been an advocate and board member for our company for the past two years. Her healthcare strategy expertise, industry knowledge, and network of contacts has been invaluable. She is deeply knowledgeable about healthcare technology and services, and has been involved in critical aspects of strategic planning, meeting facilitation, business development, and product development. I am grateful for her contribution and guidance"
-- Pankaj Khare, CEO of Bliss Healthcare Inc., Waltham, MA
Health Business Blog
Due diligence in middle market healthcare investing
Private equity firms investing in middle market healthcare deals face serious challenges in commercial due diligence. There are many companies that appear attractive, with $5M+ EBITDA, increasing revenues and enticing stories of how industry dynamics, customer relationships, technology differentiation and management excellence will take them to the next level. In the $3 trillion US healthcare industry, there are numerous billion dollar niches offering strong returns to companies that ride the wave of transformation.
Generalist investors and even healthcare specialists need support when performing due diligence in the middle market. The companies are large enough that their businesses are often complex, but small enough that there is little public information about them. Often the management team and prior investors may not have a good sense of customer demand and competitors. In addition, investors face information asymmetry, making it difficult to discern whether the management team is as confident as they seem or whether they have sensed a peak and are trying to bail out at the top.
The Affordable Care Act has set off a tremendous era of change in the industry, and diligence needs to reflect the latest understanding of how the ecosystem is changing. For example, the shift from fee-for-service to value based payments upends many business models but enables new ones. Provider consolidation can dramatically change buying dynamics as sales move to the enterprise level. The growth of public health insurance exchanges increases health plans’ appetites for cost-saving approaches.
Middle market investors have to be savvy about how they invest resources in diligence, so they often turn to boutique consulting firms that provide high value at a moderate price. In our consulting practice at Health Business Group, some of my favorite work is helping middle market private equity firms and strategic buyers test investment hypotheses and improve clarity about a company’s prospects through commercial due diligence. We interview the company’s customers and competitors, consult with industry analysts, and leverage our internal knowledge base and expert network.
Over the years we’ve worked with private equity firms and strategic acquirers, performing diligence on everything from wound care to medical benefits management to teleradiology to medical cost containment to pharma sales and marketing to healthcare information technology. Many of these deals have been completed and have resulted in long-term success. But we are unafraid to speak up and advise when a deal does not make sense, even when that’s not what our client wants to hear. Our closest relationships are with clients that we’ve steered away from bad deals.
This post originally appeared on the Health Business Blog.
Health Business Group helped develop a business plan for a public private partnership in HIV research, then worked with the organization to recruit new members and evolve its strategy and business model over several years.
Health Business Group evaluated the market for cost containment technology and services, and performed due diligence on an acquisition candidate.
A client with cutting-edge technology for point-of-care clinical decision support for providers was pursuing opportunities to expand into the adjacent payer and pharmaceutical markets.