Providers jeopardize deals as they rush into M&A talks

April 22, 2019

Healthcare executives often point to a persistent financial pressure that has accelerated strategies to cut costs, grow revenue or potentially scale up. That pressure may be causing providers to hastily enter mergers or acquisitions without the proper due diligence, some M&A experts say.

The number of failed deals hasn’t increased significantly, said Robert Creighton, managing partner at Farrell Fritz who focuses on mergers and acquisitions. About a quarter of announced deals don’t come to fruition, a ratio that has stayed relatively constant, he said.

Baylor Scott & White Health and Memorial Hermann Health System called off their merger in February, about five months after the Texas-based health systems signed a letter of intent.

Atrium Health Foundation (formerly Carolinas HealthCare System) and UNC Health Care scuttled their deal last year, about six months after the letter of intent was signed. Just this month, Atrium entered into another agreement to merge, this time with Wake Forest Baptist Health and Wake Forest University.

Cone Health and Randolph Health, also based in North Carolina, called off their deal in May 2018 after more than a year of talks as Cone Health was unwilling to “scale back projects or put them on hold,” Cone Health executives said.

“More often than not it’s related to a mismatch of expectations or a clash of culture,” Creighton said.

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