Suggest the key financial drivers that most likely will cause health care organizations to merge. Provide support for your rationale.
There are several key financial drivers that are more than likely going to cause health care organizations to merge. The first key financial driver is the challenges in the access to the capital. When the organizations do not have the investments that they want but they do have the potential for long-term grow they are going to face some challenges like the access to capital. This means that they might be taken over by the bigger firms. Healthcare has a lot of these organizations, especially in the pharmaceutical field. This is because of the new innovations that will attract the different organizations (University, 2011).
The second key financial driver is the increasing liability. When the management finds out that the liability is on the exponential growth and there is no way in the future that it can be stopped. This means that they are going to start searching for a company that can buy it out before it is too late for the company to recover. Most of the time, the other company will see the business as an opportunity to invest their money and expand the business. Therefore, an acquisition is going to take place. This type of acquisition is very common in the companies that deal with healthcare, small clinics, and pharmacies.
The third key financial driver is the rise of consumerism. Consumerism often becomes a driving force with the businesses that are related to healthcare. This means that the organizations will be looking for partners. These partners are going to need to some experience with engagement and consumer behavior.
The fourth key financial driver is the high cash flow. The companies that have high cash flow are going to have the opportunities to make new investments so they will look forward to being involved in an acquisition. The 10-k filling forms in where the cash flows of the organization can be found. The cash flow will come from the operations, investments, and the financial activities. The higher the cash flow is the more investments that the company is likely to get. This is because there will be low-interest rates that will fail to provide any real returns. Instead, it is going to provide the opportunities for new technology and management.
The fifth key financial factor is an expansion. More than likely, this expansion is going to happen because of a subsidy. The healthcare facilities might opt for no expansion in the areas where the government already provides a subsidy. But an acquisition is going to bring more revenue with the investment to have fewer interest rates and the new customers.
Assuming that two (2) health care organizations have merged. Determine the evaluation criteria that a financial analyst would use to evaluate the financial performance of the organization post-merger, and identify the determinants that the analyst would use to decide whether or not the merger generated favorable financial results for the organization. Provide support for your evaluation.
If there is a merger between two different healthcare organizations, it happens because of the intention to broaden the portfolio of the product along with expanding the global reach. The company can calculate the EBITDA during the evaluation so it is a key merger and acquisition metric when the company is calculating how successful a merger is going to be. The analyst will need to remove the expenses of the merger along with the taxes and interests involved. The analyst can also eliminate some of the effects of the capital investment in the organizations that are related to healthcare. This value is going to how the profits that the company will make after the merger. The banks and the financial analysts will be able to use this value to see how successful the merger is.
An important aspect used to track down how successful the merger and acquisition is the post-merger integration. When the buyer and the seller makes a deal during a merger, it is hostile situation because each of one the parties is going to want to cover all of their limited resources. The speed of the process of the integration will be tracked down when it is considered the most important factor in the success of the merger (Hill, 2014).
One of the other factors that might contribute to the evaluation is the stocks that the company owns after the merger has happened. These stocks are going to reflect if the stakeholders are happy when the steps that the company took. Some of the other things that the stocks will show are if the stakeholders are happy with what the company does with their money and the future investment that will depend on the starting days after the merger happened. This means that the analysts will look at the stocks when evaluating the company.
\Determine the key factors that will drive the financial planning process for most organizations in the post-merger phase, and examine the related impact to the organization process. Provide support for your rationale.
There are several key factors that will drive the financial planning process for most of the organizations in the post-merger phase. The first factor is to share the vision. The second factor is to speak up about the amount of money. This will be planned to gain the support of the company. The third factor is to discuss with the employees of the organization if they can perform individual roles more independently and accurately. The fourth factor is the formation of the new identity when it collaborates with the old and new organization.
The fifth factor is the number of employees that still work for the organization after the merger happened. The sixth factor is the total debt that the organization is going to have after the merger. The seventh factor is the interest of the stakeholders. The eighth factor is the risk management of the organization. The ninth factor is making sure that the staff is educated through training programs. This will take some investment the employees.
The healthcare organization will be greatly impacted as a result of the merger. This is because the merger is going to focus on the integration of the business and the financial systems. This is important for the procedures of the company and being able to create a successful business. But it is going to lose some of the humanitarian factors at the same time so the communication will be limited to the procedure on a need to know basis. This will affect the organization because a lot of the employees are going to want to leave the company when the work environment becomes awkward. (Forbes, 2014).
Create an argument to assert that the financial planning process is of high value to a health care organization. Provide support for your argument.
The process of financial planning is going to allow teamwork inside of a merger. The planning for a post-merger will need to be accurate so the planning will bring the teamwork. Without teamwork, the mergers and acquisitions are going to be a failure. This going to help to create the benchmark that aids in the process of good learning by the other organization. It also helps with the implementation of practices properly in order to set up the standards for the processes.
The healthcare managers in the financial planning are going to be able to set up a budget for each one of the departments and the managers of those departments will be able to collaborate with the finance team. This team will have the responsibility to install the accountability inside of the process. The financial process within each of these departments can help to lower the costs involved with capital.
The healthcare managers who use the proper financial planning have the ability to set up their own standards for their expenses. It can help the cost center to be properly tracked. It services as a motive to allow the growth and management of the merger. The financial planning is done along with the strategic planning before and after the merger happens. When the objectives of the organization are collaborated with the financial planning, it helps to guide the healthcare facilities in the right direction.
Predict the financial stability of the health care industry over the next five (5) years. Provide support for your prediction.
Based on the scenario after 5 years, the healthcare industry should be able to deal with all of the demands of the patients. This will allow the hea,lthcare industry to sustain a stronger financial position. Then in the next few years the healthcare industry needs to focus on the specialties that are related to the hospital. In 2009, the ACA are going to slow down the acquisitions but they are expected to get the pace back in the upcoming years. This will help to make healthcare more reform (Dyrda, 2014).
In the next few years, there are going to be some risks involved even though it is going to promote more mergers and acquisitions. The healthcare organizations that are larger will be capitalized throughout the expansion. This is because of the customers’ needs are rapidly changing as they become more active about their issues with their health. The healthcare industry is going to need to respond very quickly with fewer wait times. The costs of the healthcare is not really an issue now or in the future. This is because health insurance is going to develop more and more over time. Therefore, the healthcare organizations should be able to modify all of the needs of the patients in order to provide more opportunities for the healthcare industry.
Some of the new plans for healthcare are going to strengthen the stability of healthcare finances even further. This is because of the huge support that the government and the insurance companies have from the healthcare industry. The budget for healthcare has been quite constant over the last few years. This is just a reflection of how the United States healthcare industry is strong and for the next few years, it is going to remain this strong (Express, 2014).
References:
Dryda, L. (2014). “10 observations on healthcare merger & acquisition activity for the future.” Retrieved on June 4th, 2016, from: http://www.beckersasc.com/asc-transactions-and-valuation-issues/10-observations-on-healthcare-merger-acquisition-activity-for-the-future.html
Express Healthcare. (2014). “Future trends in healthcare industry.” Retrieved on June 3rd, 2016, from http://archivehealthcare.financialexpress.com/201101/anniversaryspecial09.shtml
ForbesBrandVoice. (2014). “Key drivers of healthcare M&A activity.” Retrieved on June 3rd, 2016, from http://www.forbes.com/sites/ey/2013/12/05/4-key-drivers-of-healthcare-ma-activity/
Hill, Roberta. (2011). “Steps to merger excellence.” Retrieved on June 4th, 2016, from http://iveybusinessjournal.com/publication/seven-steps-to-merger-excellence/
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