📖 Approx. 3 minutes
This article explains the key considerations for business succession and medical M&A concerning equipment and medical devices when using a business divestiture, from a practical perspective by an M&A advisor specializing in the healthcare industry. We will provide concrete strategies based on the valuation and updates of CT/MRI/electronic health records, as well as the utilization and restrictions under the Medical Care Act.
1. Industry Background of Business Divestiture for Equipment and Medical Devices
According to the Ministry of Health, Labour and Welfare’s Survey of Medical Institutions, the management environment for medical institutions, including equipment and medical devices, has become increasingly challenging in recent years due to a combination of factors such as revisions to medical fees, rising labor costs, and the burden of capital investment. Interest in third-party succession M&A is growing, particularly from the perspective of valuing and updating CT/MRI/electronic health records.
At the same time, business divestiture is a critical issue in medical M&A practice. By appropriately designing the scheme in consideration of the restrictions and utilization under the Medical Care Act, a succession that benefits both the seller and the buyer can be achieved.
2. Key Practical Points
- Preparation: Organize the specific operational flows, patient base, and equipment status related to equipment and medical devices, and clarify the transfer conditions.
- Business Valuation: Calculate an appropriate valuation range for the transfer, taking into account the characteristics of the medical specialty. For equipment and medical devices, the valuation and update of CT/MRI/electronic health records are key to the valuation.
- Business Divestiture Design: Select the optimal scheme by considering the restrictions and utilization under the Medical Care Act. Verification from tax, legal, and labor perspectives is also necessary.
- Target Search and Matching: Select potential buyers from a nationwide network that match the characteristics of the medical specialty. Carefully proceed with aligning desired conditions.
- Due Diligence: Conduct thorough investigations from financial, legal, labor, and medical practice perspectives. Also, confirm permits and facility standards specific to equipment and medical devices.
- Final Agreement and Closing: Conclude the final agreement, including representations and warranties, and indemnification clauses. Simultaneously proceed with the transfer of permits and staff notification.
3. Specific Considerations for Equipment and Medical Devices
In M&A of medical institutions involving equipment and medical devices, the valuation and update of CT/MRI/electronic health records are key to successful succession. Numerous individual issues exist depending on the characteristics of the medical specialty, such as continuity of the patient base, maintenance of employment for staff (doctors, nurses, paramedical staff), condition and update plans for equipment, and maintenance/acquisition of facility standards.
Furthermore, strategic design that considers the market characteristics unique to equipment and medical devices, such as the composition of insured and self-pay medical services, the status of regional medical cooperation, and relationships with nearby competing medical institutions, is important. Leveraging our experience in supporting the succession of equipment and medical devices, we provide practical support from an industry-specialized perspective.
4. Detailed Aspects of Business Divestiture
Business divestiture is an area that requires specialized consideration in medical M&A. Successful design, taking into account the restrictions and utilization under the Medical Care Act, is the key to success.
- Confirmation of Relevant Laws and Practice Standards: Compliance with the Medical Care Act, tax laws, and labor laws.
- Collaboration with Experts: Cooperation with certified public accountants, tax accountants, lawyers, and labor and social security attorneys.
- Risk Assessment: Identification of potential risks and formulation of countermeasures.
- Agreement Among Parties: Design of terms that ensure satisfaction for both the seller and the buyer.
- Appropriate Documentation: Explicitly stated in the Letter of Intent and the Final Agreement.
Frequently Asked Questions
Q. What documents are required for consultation?
A. It would be helpful if you could prepare financial statements for the past three fiscal years, patient number trends, staff composition, equipment lists, and lease agreements (if applicable) in advance. We will receive them after signing an NDA.
Q. What is the approximate market price for transferring equipment and medical devices?
A. For equipment and medical devices, the valuation and update of CT/MRI/electronic health records serve as evaluation criteria. For clinics without beds, it’s generally 0.5 to 1.5 times annual sales, and for clinics with beds and hospitals, it’s typically an EBITDA multiple of 3 to 7 times. We can provide details through a free preliminary appraisal.
Q. What are the points to note when proceeding with a business divestiture?
A. Prior design that considers the restrictions and utilization under the Medical Care Act is essential. Successful execution of practical matters without omissions through collaboration with experts is the key to success.
Q. Will my consultation be known to staff or patients?
A. Information will be disclosed only to a limited extent after signing an NDA, and related parties will not be informed before the final agreement. We strictly maintain confidentiality.
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Consult M&A Medical for Business Divestiture of Equipment and Medical Devices
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