So, Jim, how did you get into M&A in the first place?
Not too long after qualifying as an accountant my first major role was Head of Acquisitions for a large US funeral business that was on an acquisition trail in the UK. I worked with them for almost ten years and we must have acquired over 50 business in that time. Then it was off to KPMG to work for their Corporate Finance Healthcare team.
You then moved from the corporate world to not-for-profit health and social care M&A. Tell me more about how that happened.
So that started with a move into the NHS to lead on the merger of three large community health providers back in 2010. That got me really interested in not-for-profits and the pivotal role they play providing health and social care alongside the public sector. That was the catalyst for a move into not-for-profit advisory work and I haven’t looked back since.
Do you find there are many differences between corporate and not-for-profit M&A?
Actually, there are a lot of similarities. The technical process, from initial M&A strategy to getting the final deal over the line, is quite similar. The goals and aims are what set the two apart. Corporate M&A is all about increasing share-holder value, whereas not-for-profit M&A tends to focus a lot more on increasing social impact and improving the quality of services. Of course, that’s in addition to making sure the financials stack up.
Going forward, what do you think the main challenges are for not-for-profit M&A?
Management capacity is almost always an issue, especially when your team is focused on delivering services. That’s no surprise for anyone who knows the sector. On top of that, it’s difficult to get the right advice and technical support. It takes someone who has the skillset and in-depth deal experience, but also a good understanding of the sector. There are some great M&A people out there in the corporate world, but most don’t really get how things work in the not-for-profit healthcare space. On the flip side, there are not-for-profit advisors that have worked in the sector all their life but don’t have the cutting-edge expertise in M&A that the sector needs. It requires a good balance of the two.
One challenge that affects us all is COVID-19. What impact do you think it will have on not-for-profit M&A?
My hunch is that M&A has the potential to provide a lifeline for some struggling not-for-profits, assuming there are organisations out there that will be willing and able to act as acquirer. Overall, I think we are going to see quite a lot of consolidation in the sector over the next few years, whether that’s driven by changes to the health and social care system, commissioning requirements, or a drive for financial sustainability.
Finally, what are your top tips for anyone thinking about M&A?
It’s about being strategic from the get-go. You have to keep in mind that M&A is a tool to deliver strategy; it is not a strategy in itself. Second, there is risk involved, so I’d say take a structured approach with strong Board level leadership. Finally, don’t underestimate the impact any kind of M&A will have on the executive team and their capacity to do their day jobs. It’s a tough thing to work through, and that’s why having specialists on hand is so important.