By Tom Schramski, PhD, CM&AA
Volume 2 Issue 18, September 1, 2015
Despite the recent economic news from China and the corrections in world stock markets, we continue to see positive deal indicators in the US, with the usual caveats.
These reports and others likely point to the pent up transaction demand for baby boomers who appear to be engaging in the new “phase out” retirement phenomenon noted in August 28th edition of the New York Times. Many baby boomer professionals are rejecting the “one day I’m working, then all I do is play golf” classic retirement for a variety of reasons, including maintenance of key benefits (i.e. health insurance) and the desire to continue the intellectually satisfying elements of their work. It may be that transitions are played out in a different manner over a longer period of time than originally predicted.
In addition, there is another factor that looms, with unknown impact on projected M+A activity, as well as our economy generally – increasing wage disparity. As Federal Reserve Board (FRB) chairwoman, Janet Yellen, noted in a report to its Board of Governors last year, income disparity is “…one of the most disturbing trends facing the nation.” FRB statistics from 2007-13 indicate that the disparate concentration of wealth in the US was equal to what it was in the 1920s immediately prior to the Great Depression. In 2013, the proportion of income captured by the top 10% or earners was 47.5%.
How could this be a problem for the M+A markets including healthcare? As Christine Lagarde, the International Monetary Fund (IMF) Managing Director was quoted in a Bloomberg Business Week interview last year, the increased income gap risks creating “an economy of exclusion” that threatens to stunt economic growth in the US and worldwide, with further concentration of wealth and decreased opportunity for most. For the M+A marketplace, the possible concerns are related – shrinking values, fewer true buyers at the lower end of the middle market, and more consolidation of market segments.
This is not the typical data we cite when talking about middle market M+A, especially healthcare, but the “big picture” implications are evident.
Tom was the Founder and Managing Partner of VERTESS. He was a Certified Merger & Acquisition Advisor (CM&AA), consultant, and Licensed Psychologist with over 35 years of very successful national experience in the healthcare marketplace, including co-founding and building a $25 million behavioral health/disabilities services company. Tom represented sellers and investors across the healthcare spectrum and was recognized for his executive leadership in the 2005 Entrepreneur of the Year issue of Inc. Tom passed away in December 2018.