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Indian healthcare sector witnesses 8 M&A deals worth $1,068M this year

The healthcare sector is on the verge of rapid consolidation as collaborations, mergers and acquisitions (M&A) have become the norm due to market dynamics in the space. Also, this is driven by cost factors and the need to make use of advanced technologies to serve patients better and faster.

The sector has been witnessing many major deals as this year alone it saw over 8 deals amounting to more than $1,068 million. In 2023, PE-VC investments in India stood at $4,506 million across 19 deals.

Dr B S Ajaikumar, Executive Chairman, Healthcare Global Enterprises Ltd, told TNIE that consolidation is very helpful particularly in a niche space like oncology to bring about uniformity and standardisation of cancer care, as well as excellence in clinical innovation across the length and breadth of India.

HCG last month announced the acquisition of Mahatma Gandhi Cancer Hospital & Research Institute (MGCHRI) in Vizag, Andhra Pradesh, for an enterprise value of Rs 414 crore. HCG will have an initial 51% stake in the hospital, with plans to complete the acquisition of the additional 34% stake over the next 18 months.

Speaking about it, Ajaikumar said this consolidation will ease our process of key data collection, as also the analysis of case histories and outcomes specific to the Indian sub-continent.

He is looking forward to scaling new highs by virtue of the hospital’s association with a renowned surgeon like Dr Murali Krishna Voonna (oncology surgeon). “This acquisition is a win-win for both partners given the financial fillip and economies of scale through shared services and tapping of growth opportunities in a strategic location like Vizag,” he said.

On July 1, global investment firm KKR announced the acquisition of a controlling stake in Baby Memorial Hospital, a multi-specialty hospital network in India. This transaction builds on KKR’s track record in the healthcare sector in the country and across the Asia Pacific, which includes Max Healthcare, Healthium, and Infinx, among others.

Early this year, New Delhi-based private hospital chain Max Health Institute made two big acquisitions – Nagpur-based Alexis Multi-Speciality Hospital for an enterprise value of Rs 412 crore and Lucknow-based Sahara Hospital for an enterprise value of Rs 940 crore.

Can consolidation help boost healthcare?
Dr Debojyoti Dhar, Co-founder and Director, Leucine Rich Bio, a microbiome company, pointed out that as per the report by the National Conference of State Legislatures, consolidation of the health system may improve care coordination, quality and efficiency. Consolidation in the healthcare sector is a crucial step towards simplifying the customer experience and accelerating the adoption of novel technologies.

“As new start-ups develop groundbreaking technologies, combining these different services into one place makes it easier for patients. This approach not only makes things run smoother but also speeds up how quickly new technologies are used and expanded. It means that advanced healthcare solutions can get to people faster and be more accessible to everyone. Secondly, it helps to scale up the new technologies faster and make it more accessible to the end user,” he said. Kaushik De, Manager, Growth Advisory, Aranca, pointed out a few examples including Apollo Hospitals, which acquired Artemis and Sanjeevani Hospitals, and Fortis Healthcare, which made multiple acquisitions such as SRL Diagnostics, Escorts Heart Institute, and Malar Hospitals. Manipal merged with Columbia Asia in 2021, enhancing its coverage to 7,300 beds across 27 hospitals.

He said, “Key drivers include regulatory changes such as Foreign Direct Investment (FDI) policies and the National Health Policy 2017, which encourage mergers to meet standards and improve service delivery, as seen with IHH Healthcare Berhad, Malaysia, acquiring a controlling stake in Fortis Healthcare in 2018. Financial stability is another factor, allowing larger organisations to better absorb economic shocks and invest in growth.”

Larger healthcare entities benefit from economies of scale, reducing costs through bulk purchasing and resource sharing. Deloitte recently launched ‘The Future of Health in India’ report and describes how the future of healthcare lies in seamless, technology-driven integration.

Srikanth Mahadevan, Director, Deloitte India, said consolidation can significantly enhance efficiency and resource utilisation, allowing healthcare providers to streamline operations, reduce redundancies, and achieve economies of scale. “This results in lower operational costs and improved access to advanced medical technologies. Standardising care protocols across consolidated networks can ensure uniform, high-quality care with expanded access to underserved areas, thereby boosting public health outcomes,” he said.

Consolidation poses challenges too
Mahadevan said the path to consolidation is not without its challenges. Navigating regulatory hurdles and integrating diverse corporate cultures and IT systems requires adept change management. Compliance with complex regulations can be resource-intensive, and the financial risks, such as high integration costs, must be carefully managed. “Amidst these logistical challenges, maintaining a patient-centred approach is paramount to ensure that the essence of patient care remains at the forefront,” he said.

According to Kaushik De, consolidation poses challenges such as regulatory hurdles, cultural integration issues, and potential operational disruptions. There are also concerns about reduced competition leading to higher healthcare costs. New Indian Express

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