Saturday, September 02, 2006
Project Development
Mergers and Acquisitions
A couple of days ago, there was this news about Nicholas Piramal increasing their stake in Dr.Phadke Path Labs. The same news item talked about Metropolis Labs acquiring pathology labs in the UK, in addition to some in India. The last year has seen some high profile mergers and acquisitions in the healthcare space. One of the largest is the Fortis Healthcare takeover of Escorts Hospital in Delhi. Another is the Apollo Hospital acquisition of Imperial Hospital in Bangalore. There was also some news about Cadila Healthcare (a pharma company) taking a stake in the Apollo Hospital in Ahmedabad. Manipal Health Systems has been busy too picking up hospitals in different parts of the country. All this is so exciting.
When I came into the industry, the greenfield project route was the only way to set up a healthcare project. This often built in huge time lags because of various approvals that had to be obtained. Resulting in cost escalations. Not to mention loss of credibility among the investors, which in turn made raising capital that much more difficult. Which meant that many of the projects came into existense with the chips loaded heavily against them and therefore could never become financially viable. Many such projects will be willing targets for an aggressive acquirer.
Another aspect is that the scale of vision has evolved. A couple of decades back, a doctor with a good reputation built a Nursing Home, or a small hospital (maybe 50 beds, or even less), or a Poly-Clinic. His reputation (combined with that of his doctor partners) ensured steady patient flows, and financial success. In most cases the intent was that the next generation would take over and continue running the place. In many instances, the next generation is not keen to run the place. Also competition from larger hospitals has eroded the patient base. These larger hospitals are investor funded, and often part of a large group. These smaller hospitals too could become targets for the larger hospital groups, unless the owner/promoter enlarges his vision and becomes an acquirer himself.
Both scenarios could play out in tandem. But one thing is for sure. There is going to be significant consolidation, and most of the smaller sized projects will get gobbled up either by a larger player, or become part of a chain of similar sized projects.
A couple of days ago, there was this news about Nicholas Piramal increasing their stake in Dr.Phadke Path Labs. The same news item talked about Metropolis Labs acquiring pathology labs in the UK, in addition to some in India. The last year has seen some high profile mergers and acquisitions in the healthcare space. One of the largest is the Fortis Healthcare takeover of Escorts Hospital in Delhi. Another is the Apollo Hospital acquisition of Imperial Hospital in Bangalore. There was also some news about Cadila Healthcare (a pharma company) taking a stake in the Apollo Hospital in Ahmedabad. Manipal Health Systems has been busy too picking up hospitals in different parts of the country. All this is so exciting.
When I came into the industry, the greenfield project route was the only way to set up a healthcare project. This often built in huge time lags because of various approvals that had to be obtained. Resulting in cost escalations. Not to mention loss of credibility among the investors, which in turn made raising capital that much more difficult. Which meant that many of the projects came into existense with the chips loaded heavily against them and therefore could never become financially viable. Many such projects will be willing targets for an aggressive acquirer.
Another aspect is that the scale of vision has evolved. A couple of decades back, a doctor with a good reputation built a Nursing Home, or a small hospital (maybe 50 beds, or even less), or a Poly-Clinic. His reputation (combined with that of his doctor partners) ensured steady patient flows, and financial success. In most cases the intent was that the next generation would take over and continue running the place. In many instances, the next generation is not keen to run the place. Also competition from larger hospitals has eroded the patient base. These larger hospitals are investor funded, and often part of a large group. These smaller hospitals too could become targets for the larger hospital groups, unless the owner/promoter enlarges his vision and becomes an acquirer himself.
Both scenarios could play out in tandem. But one thing is for sure. There is going to be significant consolidation, and most of the smaller sized projects will get gobbled up either by a larger player, or become part of a chain of similar sized projects.
# posted by Srivathsan @ 12:32 AM 
