The Importance Of Due Diligence In Health Care
Health care is one of the most regulated industries in the United States, making the scope of due diligence required in any health care M&A deal drastically larger than corresponding transactions in most other industries. In recent years, the pace of health care mergers and acquisitions has increased, and that trend is expected to continue as providers scale operations to meet the demands of the Affordable Care Act. This increasing volume of transactions highlights the need for buyers, investors, and even sellers to proceed carefully in the heavily regulated environment surrounding them.
Due diligence is an essential component of any successful transaction, regardless of the industry or the structure of the transaction. Fundamentally, due diligence is a structured and systematic research endeavor that seeks to discover and aggregate the facts necessary to support informed decisions about whether to proceed with a proposed transaction, and how to structure the deal to allocate risk among the parties. Typically, due diligence is conducted by the buyer through its attorneys, accountants, and other consultants and subject matter experts. In certain cases, a seller will conduct “defensive” due diligence to prepare the company to be sold. By conducting thorough due diligence, the parties increase the chances of a successful transaction.
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Failure to understand and address these risks can quickly sour an otherwise attractive deal. Any M&A transaction brings with it a set of common pitfalls; experienced deal lawyers have developed ways to spot and avoid these hazards. However, to meet the additional challenges of health care transactions and ultimately facilitate a successful deal, targeted due diligence is
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