M&A market on hold

Tuesday, July 31, 2007

YARMOUTH, Maine -The impact of national competitive bidding on the still slumping mergers and acquisitions market won't be determined until CMS awards its contracts in December, say industry sources.
"Once we see what numbers come out of it, some of the uncertainty will go away," said Rick Glass, president of Steven Richards & Associates in Tarpon Springs, Fla. "That's one of the reasons why the market has stalled--the uncertainty."
Further certainty will come when CMS implements new fee schedules in the 10 competitive bidding areas (CBAs) in April. With that milestone under the industry's belt, sources anticipate "some acquisition activity."
"People may decide they want to be in the program and people will want to expand their service capabilities," said Bob Leonard, an associate with The Braff Group in Pittsburgh.
Depending on the fee schedule, companies who win bids could increase in value and attract higher offers. Conversely, companies who don't win bids could see a drop in value, say industry sources.
For the past two years, it hasn't been a good time for the M&A market, industry sources concede. In addition to NCB, the industry has struggled with the 36-month cap on Medicare oxygen reimbursement.
"Whenever risk's involved--and right now there's a lot of risk--the whole cost structure of a company goes down," said Gina Bienkowski, vice president of Ultimate Resource in Newtown, Pa.