The pace of overall M&A activity has slowed during the Covid-19 pandemic, but activity in certain sectors, particularly information technology and healthcare (and therefore, healthcare information technology), have maintained their pre-Covid-19 speed. With the dynamics of aging populations that need to be taken care of, development of the next generation of drugs to fight cancer and other diseases and the need to test, treat and prevent infectious diseases like Covid-19, the prominence of healthcare companies in the M&A world will continue. Because of the high demand for their products and services, sometimes high profit margins and potential for explosive growth, these companies will continue to be attractive targets for buyers. Many normal aspects of a company’s operations are particularly sensitive in the healthcare arena. Buyers and sellers need to give heightened attention to these areas, including the following:
- Privacy Data and Information Security – protected healthcare information is a big issue in this segment of M&A. Although this information has been regulated for years, with the relatively recent adoption of GDRP (covering European Union residents) and California’s new privacy laws, and with more state specific laws sure to be enacted, the security of protected information needs to be in place and constantly updated.
- Healthcare Regulation – many functions and transactions of a normal business are subject to much greater scrutiny and restrictions in the healthcare environment. Matters such as employee compensation, billing practices and leasing arrangements are highly regulated and subject to tough scrutiny and enforcement by regulators.
- Intellectual Property Rights – the use of processes and methods (inventions and patents) and product and service names (trademarks) is of particular importance in the healthcare industry. Measures need to be taken to protect and assure that there is no interference with the rights of others in the use of those items.
- Licenses – more than many industries, healthcare related companies and certain individuals employed by them are required to have licenses at the federal, state and sometimes even local levels.
- Product Integrity – many products and some services in the healthcare industry are highly regulated and must be approved and satisfy strict requirements of the United States Food and Drug Administration (FDA) and state regulatory bodies.
- Insurance – with the enormous amount of legally protected information that healthcare companies have access to, error and admissions insurance, including cyber security liability coverage, is a must. The levels and scope of that coverage should be reviewed regularly.
By making sure that the above areas are properly covered, buyers and sellers can reap the profits, while mitigating their risks, of what is sure to be a continuing boom in many parts of the healthcare sector.
If you have any questions about this or any other M&A issue,
please contact Glenn Solomon at firstname.lastname@example.org or 443-738-1522.
ABOUT GLENN D. SOLOMON
email@example.com | 443-738-1522
Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
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