Study: M&As don't guarantee long-term value
Amid the increase of mergers and acquisitions throughout the health insurance industry, a new study has found they don't always raise the value of a company.
After analyzing 44 transactions that occurred between 2006 and 2012, the Deloitte Center for Health Solutions determined that less than half of the deals resulted in sustained value improvements.
For example, 55 percent of mergers and acquisitions immediately resulted in increased price per share at the time of the deal, but only 39 percent of those deals maintained an increased value three years later.
The problem is that insurers have been focusing too much on the deal itself and not concentrating on long-term goals and value. For a successful M&A, Deloitte said, the process should be "systematic, forward looking, operationally astute and data driven."
To increase value after mergers and acquisitions, insurers should aim to combine administrative functions, maximize pharmacy and network pricing, and plan and execute provider networks and pharmacy contracts that yield potential gains.
"At the end of the day, it's about leaders of both organizations willing to share a goal and assume risk," the report states.
To learn more:
- here's the Deloitte study (.pdf)
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