Healthcare doesn’t need to be disrupted, but it is ripe to be simplified through M&A
Scaling a digital healthcare company in Europe is no easy task. From the complexities involving institutions in different countries to the regulations and insurance structures from region to region, the global healthcare market is especially difficult to navigate. Entrepreneurs are naturally ambitious, but in this arena that drive will only get you so far. To achieve international growth and successful product-market fit, digital healthcare founders need a dose of strategic M&A.
Some may roll their eyes at the notion of M&A, deriding it as a strategy used by giant corporations to buy up challengers. But the timescales and realities of bringing a clinical product to market mean that a fully organic approach to growth in digital healthcare is neither practical nor in the best interests of users. Mergers and acquisitions have therefore become a key component of the expansion strategy of many digital health companies.
Indeed, the growth and diversification of the digital healthcare market, which saw US healthcare firms raise nearly $32bn, and UK companies raise $3.8bn in 2021, has been met by an increase in M&A activity. M&A activity in digital healthcare grew by more than 40 per cent last year, according to CB Insights.
Growing a business completely organically has many advantages to a founder, allowing them to hold a tighter grip on their whole operation, but the complexities of the healthcare market mean many founders of digital healthcare companies cannot afford that luxury.
Across Europe, healthcare systems differ massively from country to country in terms of institutional structure, tech adoption, patient access and more. For example, under the NHS in the UK most patients don’t pay at the point of care, while next door in Ireland, their universal healthcare system charges its citizens for government subsidised services. The difference between these two markets demonstrates why the idea of taking an offering from one country and copying and pasting it globally simply doesn’t work. At least, not without major disruption.
This is also a distinguishing factor for digital healthcare founders from the wider realm of entrepreneurs: they should not consider themselves disruptors. While other industries may benefit from a “shake up”, the last thing that the healthcare industry wants or needs is for a founder trying to force their way into a new country and complicate their healthcare system. Instead, digital healthcare founders have to focus on how they can work with and enhance an ecosystem of established medical bodies and organisations across any given region.
In this case, M&A of applications that have already been developed for and deployed in a country is a more advantageous way forward. The best regional solutions can become integrated into a wider platform of global healthcare services, and provide a more holistic service for everyone involved.
Digital healthcare founders should focus on the solutions that they cannot easily replicate, either because they require regional knowledge, or because they address a specific use case perfectly.
They should also ensure the company they acquire makes sense in building a portfolio which gives users what they need and creates a holistic solution for patients, not siloed and unconnected products. M&A should make the digital health sector simpler, more convenient and easier to access.