6 minute read 10 Dec 2019
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Confident views of health sector and global growth sustain M&A appetite

By EY Global

Ernst & Young Global Ltd.

6 minute read 10 Dec 2019

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  • CCB 21 Health highlights (pdf)

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  • Global Capital Confidence Barometer – Edition 21 (pdf)

M&A intentions remain above nine-year average as health executives look to accelerate their growth agendas.

According to the latest EY Global Capital Confidence Barometer (pdf), M&A intentions remain above the nine-year historic average as health organizations look to obtain capabilities to accelerate their growth agendas. In particular, health organizations are looking to access new markets, build digital capabilities and address persistent talent shortages.

Health executives feel confident in their dealmaking based on optimistic views of both global and sector economies. More than three-quarters (76%) say that the global economy is growing — down slightly from 85% a year ago. But their view about their own sector’s growth increased, with a little more than two-thirds (67%) agreeing that the health industry is growing, versus just 53% a year ago.

Health economic outlook


of health respondents say that the economy in their sector is growing.

Further, 59% indicate that they do not see an economic slowdown on the immediate horizon. Yet even if they did, given the countercyclical nature of health care, the sector is less likely to be affected by an economic downturn than companies in other industries. Whether a global downturn materializes or not, 64% of health respondents are expecting modest to strong revenue gains, while 61% expect such increases in profits in the next 12 months.

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Although health executives are feeling optimistic, they see regulatory uncertainty as their greatest risk to growth in the year ahead. Within their own organizations, 25% of health executives indicate seeing disruption coming from new market entrants (17%) or technology (8%), while 16% see the primary disruptor as increasing competition from existing competitors.

The market disruption in health, powered by both traditional players and new entrants alike, manifests as novel, consumer-centric business models enabled by data. Innovative models are being created through, for example, vertical integration of payers and providers, the creation of employer-owned health hubs and the sharpened focus of technology giants on health care.

Two-thirds of health executives understand the transformational impact of digital

Roughly two-thirds of health respondents agree that their organizations have a clear vision for digital technology and acknowledge its transformational impact on business strategy, as well as the opportunities digital offers to reposition their portfolio and overall business. Further, 80% say their CEO has a clear vision of how acquisitions and divestments can help to accelerate digital transformation, while 38% report they will actively use M&A as a means to future-proof their business.

The drive to leverage digital technology to power their growth agendas has half of health organizations allocating 25% or more of their annual investment capital to digital capabilities. Of that total investment in digitalization, one-third are directing 25% or more to new growth opportunities — as opposed to more protective activities, such as optimizing the business through internal efficiencies.

Digital transformation


of health respondents intend to allocate 25% or more of their annual investment capital to digital capabilities.

In the next decade, health care consumers and physicians expect that the core business of health will be anchored around digitally enabled models of care, including virtual delivery and interactive person-centered tools, as reported in EY NextWave Health surveys of consumers and physicians in four countries (Australia, England, the Netherlands and the US). An acquisition, joint venture or any other risk-sharing partnership with a health technology firm can help accelerate the digital agenda and create the more personalized and connected care offerings consumers increasingly expect.

M&A is seen as a stabilizing force against intensifying disruption, but health organizations are preparing for more competition from private equity

Although M&A intentions are down five percentage points from health executives surveyed 6 months ago, 45% indicate that their organizations intend to pursue M&A in the next 12 months. While cost pressures will continue to drive horizontal integration, potential disruption by technology and consumer firms will propel more vertical integration in the industry.

M&A survey health sector mergers and acquisitions

More than two-thirds expect to see an increase in competition over the next year, with nearly as many saying it will come from private equity. Private equity firms focused on health continue to have significant cash to deploy. According to a recent EY-Parthenon survey of more than 80 health care company executives with direct PE investment experience, 90% said PE involvement with their company has been an overall positive, with over 80% of those surveyed stating that they were highly likely to consider PE investments in the future.

Purpose and social impact are reshaping the way health companies measure success

As health organizations look ahead, they are coming to understand how purpose and social impact are fundamentally reshaping the way companies measure success. Most have established metrics to gauge financial and customer performance (65% and 63%, respectively, say they have metrics in place), and nearly half (46%) now measure social value. Forty percent more say they intend to adopt such measures within the next year.

The one area where they seem to be lagging is in measuring the value of talent. Currently, only 31% have metrics in place to measure talent performance. In need of an urgent turnaround, 58% say they will adopt metrics for talent over the next 12 months. Given that 65% of health respondents say they struggle to hire and retain talent — the shortage of which the World Health Organization estimates will rise to 18 million health workers globally by 2030— it’s a critical area of performance that requires creativity and strategic focus.

Talent shortage


of health respondents say they struggle to hire and retain talent.


The EY Global Capital Confidence Barometer (pdf) gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas.

About this article

By EY Global

Ernst & Young Global Ltd.