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Predictive care with data-driven approach to drive healthcare M&A

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“Data-driven strategic partnerships will drive market leadership for the companies in the healthcare sector,” writes Mahesh Singhi, Founder & MD, Singhi Advisors

The healthcare ecosystem is gradually becoming networked. On one hand, there are healthcare service providers such as clinics and hospitals – both public and private, one the other, there are key stakeholders such as pharmaceutical companies, diagnosis labs, retail players, technology developers, healthcare insurance providers, etc. In a networked healthcare environment, data and technology are emerging as key growth drivers. So, companies in healthcare value-chain will be using data and disruptive technologies to achieve growth. With distinctions between health and technology diminishing, erstwhile healthcare business models require structural overhaul or strategic recalibration. So, global and Indian healthcare companies will leverage M&A to acquire digital capabilities. As affordable healthcare is the key agenda of the government, the healthcare service providers, health insurance companies and pharmaceutical companies will have to realign their product and service strategies. The deal-making scenario will reflect that trend.

Moreover, the definition of value-creation is set to transform, as it’s no longer restricted to developing a product and service by investing in research and development, diversification and specialisation, etc. Data and collaborations will become the focal point for predictive healthcare and investment in acquiring disruptive technology and engagement platforms will flow towards that direction. Data-driven strategic partnerships will drive market leadership for the companies in the healthcare sector.

Companies need to look for acquiring companies with proven expertise in artificial technology, cloud computing, predictive data analysis to address the trade and business challenges in the healthcare space. For instance, healthcare services are fast becoming digitised worldwide and in emerging economies like India. With the growing data penetration and use of smartphones, the days are not too far away when the process of making appointments with doctors and collect medical test reports will go online. Healthcare players will need to plan ahead of time and either look for acquiring the technologies that can facilitate that transformation or collaborate with companies that offer such technologies. The service delivery model is expected to witness a massive transformation which will become more consumer-driven. More consumers and technologies intersect, the better for the development of the healthcare space. And, to make that intersection happen, the healthcare players require meaningful data. So, companies in the healthcare space will increase their focus on technology adoption.

Across the globe, life expectancy is increasing thanks to progress in healthcare. According to the National Health Profile 2019, life expectancy in India has gone up to 68.7 years in 2012-16 from 49.7 years in 1970. That’s a critical point to consider, as the statistics imply that a growing number of people are living a long and healthy life. As an increasing number of people are demanding access to advanced healthcare services, healthcare players in India will need to go for a collaborative and digitally-integrated ecosystem. This becomes imperative to improve the competencies of a healthcare sector that is grappling with the challenges of lower penetration and lack of trained workforce. The way-out would be to go for a collaborative and digitally-integrated ecosystem. The M&A trend in healthcare sector will reflect that trend.

The pharmaceutical companies are now responding to evolving healthcare demands which can be categorised into various segments. On one hand, there are premium medicines which come under the coverage of health insurance and medicines to cure chronic illness. On the other, there are demands for affordable drugs and medicines for lifestyle diseases. So, the companies should have a different deal-making approach for each of the segments with a focus on offering predictive care. In the healthcare supply chain, the role of each stakeholder is inter-linked. Quality medicines manufactured by pharmaceutical help physicians offer quality care to the patients. So, the data-driven approach helps in creating an enabling ecosystem for the health care service providers and pharmaceutical manufacturers in delivering value. An efficient digital technology facilitates an effective real-world data capture which, in turn, offers more clarity while devising product and service strategy. Acquiring smart technology is also at the heart of enhancing patient experience and brand loyalty.

To offer comprehensive predictive care, companies in the healthcare segment will aggressively focus on enhancing their scale of operations through M&A, acquire companies with proven digital expertise to enhance proficiency or collaborate with other strategically beneficial companies to boost efficiency. Data capturing and interpreting those data to augment healthcare has emerged as a worldwide trend which will reflect in the future Indian healthcare space. Companies with a dedicated healthcare and disease-control focus can strengthen their core expertise by collaborating with tech companies.

Healthcare space in India has witnessed big-ticket carve-out deal (selling off non-core assets) with GlaxoSmithKline selling its consumer healthcare business, to Hindustan Unilever. Going forward, we can see companies may look at divestitures (selling off subsidiary business) and asset swaps to enhance market competitiveness and realise value. The trend will lead to a new phase of portfolio optimisation and product and service innovation.

The broader objective behind a data-driven approach is to strengthen category leadership positions by acquiring required assets and technology. Category leaders are capable of delivering higher profitability.

There is a prevailing trend in the healthcare sector wherein companies adopt a wait-and-watch mode when it comes M&A transactions due to geopolitical uncertainty and higher asset valuation. It’s unwise to wait for signs of stability to resurface in the market as unwarranted delays could derail companies from traversing a higher growth trajectory. One needs to strike a balance between one’s firepower and market valuation of the assets as a mismatch will disrupt business growth outlook.

It has become imperative for high growth companies to divest non-core assets and add scale to their business. Companies must also weigh whether they are only focusing on short-term earnings to show returns to the shareholders. They should also focus on investing keeping future growth in mind.

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