High Stakes

Jarrard M&A Spotlight Series Part 1: Wrestling with Transactions

jarrard spotlight series

A four-part series on M&A featuring advice from healthcare dealmakers

Part 1: Wrestling with Transactions

By Anne Hancock Toomey

Let’s start with the bottom line: Consolidation in healthcare is only going to continue. No matter what happens in Washington, D.C., provider systems must continue to move toward delivering better outcomes at lower costs. The ability to do just that depends – in part – on having scale.

Attaining scale isn’t easy. Culture, politics, regulatory oversight, along with a host of other internal and external factors, can be hurdles to completing even the smartest transactions.

With that dynamic in mind, we reached out to some leading healthcare mergers and acquisitions experts we’ve worked with over the years for their insight on transactions. We asked them to share what makes deals succeed, what causes them to fail and what advice they have for executives and directors wrestling with their own transactions.

Their responses were so compelling, we’ve created a four-part M&A Spotlight series to highlight their thinking.

Today’s question for our experts:

“What piece of advice would you offer a health system executive or board member who is wrestling with the question of a strategic transaction?”


Angela Humphreys
Chair of the Healthcare Practice Group, Bass Berry & Sims

On the buy side, it is critical to understand the synergies that can actually be achieved and management’s analysis behind post-closing projections. Statistics show that transactions take twice as long and cost twice as much to integrate as expected, and synergies realized are often less than projected.  Fully vetting the integration process and the synergies that can be achieved is key to making an informed decision.

On the sell side, understanding the current competitive bidding landscape and your organization’s markets and position within those markets is key to establishing the framework for maximizing value for the organization in the negotiation process.


Matt Smith
Partner, BKD

Decisions of whether to do deals are some of the biggest decisions that a board will make. And hospital/health system board members don’t always have significant M&A experience. Make sure that the board is appropriately supported with a team of experienced advisors to assist them with the transaction process, acknowledging that the interests of the management team may not always align with those of the board.


Pamela Hepp
Shareholder, Buchanan Ingersoll & Rooney

The Board should spend a significant amount of time with management in advance of a search for a strategic partner to develop a list of what they are seeking in and from a combination.

Also, look to “marry” strength to strength when possible and be prepared to deal with your weak areas, even if it means curtailing services, programs or locations which are not viable.


Rex Burgdorfer
Vice President, Juniper Advisory

Keep an open mind and thoroughly explore all available strategic options.  This is the only way to make a well-informed decision.  Human nature teaches us to rush to conclusions: “We should merge with XYZ!”

Even if that is the result, a well-designed process will (a) ensure that fiduciary duties are met, and (b) provide solid evidence to external critics that a fair outcome was achieved (value, terms, etc.).  A disciplined process also produces a range of practical, actionable and structural models.  Most board members find this educational, and it sparks new ideas, even if implemented in the original arrangement.

In the past, options were binary: Remain independent and dig in to try to become more effective alone, or become subsumed by the regional competitor down the road.  There has been significant innovation in the number of hybrid, middle ground structures.


Jay Harris
Partner, King & Spalding


Jeff Spigel
Partner, King & Spalding

The primary consideration for the health system executive or board member considering a transaction is to answer the “why” question.  Why should our organization pursue the potential transaction?  One potential answer is that regardless of how the ACA may be amended or replaced, each health system in looking forward should consider how to increase efficiency, lower costs and improve the quality of the services delivered.  Analyzing how a potential transaction can address one or more of these goals can give guidance on whether to pursue the deal.  Importantly, answering these questions can also address the issues that may arise from an antitrust review of the transaction.


Bart Walker
Partner, McGuireWoods

I would say consider it. No one in this industry can afford to be standing still. Playing baseball growing up, one of my coaches told us that the shortest path is a straight line in the opposite direction. He meant that even if you are moving in the wrong direction, at least you aren’t standing still. Same for hospitals and health systems – even if you are moving in the wrong direction, you can still adjust your course. If you are standing flat-footed, you’re dead.


Joshua Nemzoff
President, Nemzoff & Co.

Make sure that when the smoke clears and the deal is done that it is very clear who is in control, and that there are going to be changes. Taking a distressed hospital in need of change and telling everyone that you are not going to make significant changes is a great public relations concept that will result in operational disaster. If you do not have the stomach for change, then don’t do the deal.


Eb LeMaster
Managing Director, Ponder & Co.

Design a well thought-out, orderly process and stick to it.

Ken Marlow
Partner, Healthcare Department Chair, Waller Lansden Dortch & Davis

Clearly identify your goals for the transaction and have strong board consensus with respect to the goals.  In addition, spend the time on the front end evaluating the prospective partner to ensure that it will help you achieve such goals.  The transaction needs to be one in which 1 + 1=3.  Without this foundation, the parties may have significant conflict and a sense of disappointment that their goals were not realized following the consummation of the transaction.

Part II of our M&A Spotlight Series will appear Thursday, July 20, 2017. In it, our experts will answer: “What are the most common factors that make deals succeed?”


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