From Trust to Profitability

The Role of Branding in Healthcare M&A

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In a competitive landscape of rising costs and disruptive technologies, providers and investors must harness their brand as a key business asset. Director of Healthcare + Wellness Ruben Toral discusses the power of branding in healthcare M&A.

healthcare m&a

Investor enthusiasm for healthcare assets in Asia-Pacific is strong and getting stronger.

According to Deloitte, the global healthcare market is valued at over $8 trillion. In 2018 alone, global cross-border mergers and acquisitions (M&A) in healthcare totalled $182 billion. The report highlights Asia-Pacific as one of the fastest-growing regions in healthcare spending—a mega trend driven by demographics, lifestyles, disease rates, urbanisation, rising incomes and higher demand for private healthcare.

The takeaway is obvious. Healthcare is the place to be and no one understands that more than investors and private equity companies specialising in healthcare. Valuations are getting frothy, and as the pool of quality targets shrinks, deals become more competitive and valuation multiples rise. In that environment, providers and investors want to optimise every part of the business—and that should, but rarely does, include the brand.

Having a trusted brand in healthcare is not only desirable—it is critical. Consumers trust brands, and no industry is more trust-driven than healthcare. Strong hospital brands drive volume, acuity and loyalty and generate higher margins than their peers. They also attract medical tourists—a lucrative source of high value patients that will travel for higher acuity, specialty services.

McKinsey research shows that “top-ranked brands outperformed the world market by 74% as measured by return to shareholders.” Yet, brand value is rarely ever fully captured in M&A, because operators and investors focus on levers they can control to impact margins—cost optimisation, operational efficiencies and capital allocation. Brand is an intangible asset and as such not recognised on the balance sheet.

Yet, the same report emphasises that “the value of a strong brand cannot be underestimated in today’s fast-moving commercial environments, where customer loyalty is notoriously difficult to acquire and sustain.”

Globally, hospitals are investing billions of dollars—purchasing, acquiring, merging, integrating and upgrading—all with the goal of improving patient care and maintaining a sustainable, profitable business. But to connect with patients, healthcare providers and investors must recognise, invest and leverage one of their most important business assets—their brand.

Providers and investors at every level are now competing harder and spending more to acquire assets, grow their business and retain patients in the face of rising costs, disruptive players and digital technologies. The one constant in this sea of change is the role of a brand as a value creator that impacts choice, pricing, loyalty, advocacy and shareholder value.


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