Health & Technology M&A Deal Drivers: Efficiency, Experience and Post-Pandemic Efficacy

By August 17, 2020 Insights

Technology will always drive M&A deal activity. What is interesting, especially across the middle market, is the opportunity in tech’s intercept with other industries — and more frequently aimed at enhancing end-user experience. As we fold in implications from the COVID-19 pandemic, these trends will likely continue across industries with health leading the way.

Across health care, technology has transformed the way patients and providers interact. With greater visibility into the care provided, patient expectations are increasing. The global spread of coronavirus, however, has prevented face-to-face interaction. Companies (especially new players) must invest in patient experience, such as telehealth applications that strengthen doctor-patient relationships, and AI tools that transform care to preventative and patient-centric models or precision medicine that drive outcomes and greater efficiency.

Heightened awareness around COVID-19 is also driving growth in the infection control space, as networks work to evolve operations and implement tools to prevent the spread of virus within facilities. Prior to the pandemic, nearly 1.7 million people acquired healthcare associated infections in a U.S. hospital every year and risks of life-threatening infections are increasing, making infection control products more relevant than ever.

Seal Shield, for example, has innovations that provide customers with an extensive solution for infection control management, providing washable and antimicrobial mice, keyboards, screen protectors, as well as mobile device management UV-C sanitizing products. In June 2020, Auctus Capital Partners announced its role as exclusive advisor, supporting Seal Shield in secured financing and a revolving line of credit. The transaction enables the company to pursue a growth strategy that keeps up with rapidly increasing demand for multiple products across an expanding customer base and solidifies its position as a market leader in a category that will double in size in the near future.

In the short term, looking at Q4 and into 2021, we will also continue to see larger pharmaceutical companies acquire small and mid cap biotechs to preserve their pipelines. Newer therapeutics require years for development and cost millions to advance. As such, external deals will remain one of the most important innovation sources against a backdrop of declining R&D returns, greater pricing pressures and declining (or stagnant) sales of mature drugs.

Post pandemic, there will likely be a resurgence in demand for elective medical procedures that will put a strain on existing resources. Some medical procedures, such as cosmetic and dermatological, will not be time-sensitive. Others, such as cardiology and radiative-oncology will be very time-sensitive. Medical resources for testing and elective procedures may be constrained for 12-18 months after the pandemic subsides and the healthcare environment adapts to a new normal.

For middle market companies, the willingness to explore new strategies — within and outside the industry — can affect success in today’s environment. Strategies may include everything from revisioning business models to expansion into new markets to M&A; all aimed first at efficacy in a post-pandemic environment, then greater efficiency and the ability to deliver results and customer experience.

Auctus Capital Partners exists to help businesses identify opportunities and navigate their way through M&A transactions, capital raising scenarios and strategic advisory solutions that maximize value and achieve favorable outcomes. Contact Auctus to learn more about M&A and other advisory services it provides clients. Whether our client is public or private, selling a business unit or the entire company, we have a passion for what we do and dedicate senior bankers to every transaction from start to finish.