Tag: due diligence

Acquisition/diversification strategy for sales and marketing services company

December 1st, 2017 by

The client began as a contract sales organization serving large pharmaceutical companies. Market dynamics had been deteriorating as the pharmaceutical industry as a whole began to reduce the size of its sales force and as large customers started negotiating more aggressively. We worked with the client to develop and execute an acquisition and diversification strategy that resulted in a 30-fold increase in stock price over the course of our five-year engagement.

The strategy had three main thrusts: (1) assembling a broader portfolio of outsourced sales, marketing, and product development offerings, (2) focusing business development efforts on mid-sized and smaller customers who viewed outsourcing as a strategic imperative rather than a necessary evil, and (3) becoming an attractive acquirer for private company owners seeking a strategic buyer and the opportunity to continue their career growth. We helped identify acquisition candidates and performed commercial due diligence on companies in medication adherence, data mining, predictive modeling, pharmacovigilance, professional staffing, cost containment, sales force automation, advertising and market research.

Medical benefits management diversification for PBM

December 1st, 2017 by

A leading pharmacy benefit management (PBM) company had achieved a robust growth trajectory via organic growth and acquisitions. Health Business Group was asked to evaluate the attractiveness of other medical benefits markets including oncology, radiology, orthopedics, and medical devices and to develop an entry strategy for the more promising ones.

We developed a baseline market size estimate for each opportunity, using secondary sources to segment the market by key characteristics. We also researched pricing levels and market growth along the same dimensions.

We assessed the impact of ongoing and anticipated industry changes on the attractiveness of the market. Benefits management is a dynamic field, with significant changes underway in payment methodologies and reimbursement levels, evolution in evidence-based guidelines, concerns about patient safety, new technologies, and changes in patient mix.

We investigated the competitive landscape to understand current capabilities of the main players, and to assess the value of our client’s technology, knowhow and relationships in these fields

We worked to create a rigorous fact base built upon primary and secondary research. We provided a refined assessment of the attractiveness of the opportunity as well as market entry options with advantages and disadvantages of each. For the most promising segment we conducted acquisition screening and performed commercial due diligence on two companies.

Health plan IT systems due diligence for private equity firm

December 1st, 2017 by

A large private equity firm asked Health Business Group to assist in the commercial due diligence of a core information technology provider for health plans.

The target was a leading player with smaller health plans and was aggressively trying to gain ground with larger customers but encountering entrenched competitors. The target had a compelling offering that matched up well with competitors along the areas of benefit administration, care management and member engagement. In addition the target offered a more modern, modular system design that provided superiority in terms of performance, flexibility and cost. Health Business Group was asked to focus efforts on validating the aggressive revenue plan necessary to justify the deal terms and valuation.

We provided input into key questions upon which valuation would depend:

  • From the customer perspective, how does the target’s offering compare to other direct and indirect competitors?
  • How satisfied are existing customers? What are the key sources of satisfaction and dissatisfaction?
  • What industry trends will drive new product requirements (e.g., ICD-10, new HEDIS reporting requirements, new payment models)?
  • How do prospective customers view the target? How well-positioned is the company to move up market?
  • What is the decision-making and contracting process? Who are the decision makers and influencers? How is the process conducted? What is the timeline?
  • What are typical budgets and price points?

Based upon management meetings, industry conferences, and discussions with health plan management across marketing, operations, IT, and provider services domains, the due diligence findings showed significant upside revenue potential but a longer sales cycle than projected. The transaction was ultimately completed but at a lower valuation.

Diversification strategy for healthcare analytics vendor

December 1st, 2017 by

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.

Expansion into new markets meant a whole new set of direct and indirect competitors. Health Business Group provided an in-depth perspective on the market and competitive environment for healthcare analytics across the relevant markets and helped the client understand how the market would evolve over time.

We segmented the analytics market by major customer type, estimated the size and growth of each segment, and identified the leading players in each segment. We did extensive analysis of the top 15 to 20 competitors in each major segment. This work included a detailed outline of service offerings, customer segments served, key customers, value proposition, size and growth, alliances, M&A activities, sources of data, pricing structure and levels, reputation, and strategic intent. A fact base was constructed through a combination of primary and secondary research, including company and customer interviews, industry conferences, market research, SEC filings, and analyst reports.

With a shared, in-depth understanding of the current and evolving healthcare analytics marketplace and the key players, we worked with management to develop a set of strategic and tactical implications, including business development, product development, pricing, positioning, and bundling.

The client highly valued our work product and collaborative process. Over the following year, the client was successful in expanding into new markets and was ultimately acquired by a national health plan.

Medical cost containment acquisition for strategic buyer

December 1st, 2017 by

Health Business Group has assisted many clients in developing their growth strategies, often tapping into new products and services in existing customer segments and assisting clients in expanding into new customer segments. An outsourced healthcare services client was interested in expanding into a new market segment by providing medical cost containment solutions and asked Health Business Group to evaluate the market and perform due diligence on a potential acquisition.There are different approaches to medical cost containment, many of which rely upon claims analysis. From a clinical perspective, this can be used for intelligent benefit plan design and risk stratification for disease management and wellness initiatives, screening for medical necessity/appropriateness, and other uses. From a financial perspective, this analysis can be used for claims re-pricing, claims arbitration/negotiation, and fraud and abuse identification.

In our assessment, we found that the market was slowly evolving from best-of-breed to one-stop-shop as a way to simplify the supply chain and minimize integration points of failure. The rate of evolution was constrained by the ability of the vendors to offer broad, fully-featured solutions.

We evaluated the needs of the self-funded employer market and how they were being met by TPAs and service/technology providers. We conducted primary and secondary research, which included speaking with TPAs, employers, brokers, and peers of the client. We further segmented the target customer markets, determining the size, degree of outsourcing, level of satisfaction, and the target company’s competitive positioning in each segment.

Ultimately, we determined that the target was well-positioned for future growth and would be a complement to our client’s strategy. The acquisition was subsequently completed.