Survive and thrive with M&A
With the rising costs of health care and shrinking margins, it’s tough for HME providers to stay competitive. At Medtrade Spring in Las Vegas, in a session titled “How to use Mergers and Acquisitions to Succeed in Today’s Changing DME Marketplace,” Bradley Smith, managing director and partner at Vertess, will discuss how to use mergers and acquisitions as an alternative way to stay alive in a complex market.
HME News: How can M&A help an HME provider thrive in a consolidating market?
Bradley Smith: There are two different camps, those who don’t currently have economies of scale and those who do. If you’re under the threshold of sustainability, in terms of revenue, you most likely need to merge with someone else to grow. On the other side of the equation, if you’re big enough, you can grow more efficiently and inexpensively by acquisitions.
HME: How should an HME provider go about determining whether or not M&A is the right strategy?
Smith: Self-reflections. To survive, you need to grow as big as possible, or as fast as possible, to keep growing. So what does that mean for your business?
HME: What’s valuation in the HME market looking like these days?
Smith: Without scale, it doesn’t look very good, but like beauty, it’s in the eyes of the beholder. The basis of any valuation is ROI. And what that ROI is, is worth more to some than to others.
HME: What will the market look like in five years due, in part, to M&A activity?
Smith: There will be further consolidation and fewer players, because you need economies of scale.
HME: What’s the one thing you want attendees to take away from your session?
Smith: You need to be using all the tools that are available to you, and M&A is one of those tools.