Medical Corporations Targeted Amidst COVID

News Highlights

Incidents have occurred in Osaka and Fukuoka where medical corporations facing financial difficulties due to the COVID-19 pandemic have become targets for fraudulent loans. Cases have been reported where these corporations, exploited for their deteriorating financial situations such as poor liquidity ratios and consecutive deficits in operating profit margins, are coerced into participating in fraudulent schemes under the condition of releasing personal guarantees. Consulting with experts at an early stage and choosing business succession through M&A can lead to avoiding closure and maintaining regional healthcare and employment.

M&A Medical Editorial Perspective

This case highlights how the operational realities of medical institutions struggling during the COVID-19 pandemic can become a breeding ground for “fraudulent/unauthorized lending” by malicious third parties. Specifically, signs on financial statements like deteriorating liquidity ratios and consecutive deficits in operating profit margins are objective indicators of financial distress, and the fact that these can become a “lure” into fraudulent schemes is a point that requires attention even in the field of M&A brokerage. In M&A conducted under sound financial conditions, negotiating terms such as the release of the clinic director’s personal joint guarantee is possible. However, in situations where a corporation is in financial distress and has been coerced into participating in fraud, the room for negotiation is significantly narrowed. This case serves as a reminder of how crucial it is to consider M&A and business succession early and appropriately, not just to avoid closure, but from the perspective of continuing regional healthcare and maintaining staff employment.

Points Raised by This News

• The financial difficulties caused by the COVID-19 pandemic have led to medical corporations becoming targets of fraudulent loans.
• Deteriorating liquidity ratios and consecutive deficits are signs of financial distress and can potentially lead to fraudulent schemes.
• If coerced into participating in fraud, there is a risk that negotiating the release of personal guarantees will become difficult.
• Early consideration of business succession is essential to avoid closure and maintain regional healthcare and employment.

Practical Questions Arising from This News

• If I were approached with such a fraudulent loan offer, how should I refuse it?
• Which figures in the financial statements should I check to detect early signs of financial distress?
• What are the legal responsibilities if I have participated in fraud?

If You Feel “Should I Consult?”

If your institution is struggling with cash flow due to the COVID-19 pandemic and you are receiving suspicious financial offers or loan proposals, it may be the entrance to a fraudulent scheme. If your financial situation is significantly deteriorating, please promptly consult with a trusted M&A intermediary or expert before negotiations for the release of personal guarantees become difficult. We will work together to find the best solution for continuing community-based healthcare, rather than closing down.

M&A Medical (CentralMedience Inc.) supports the business succession of medical corporations, hospitals, and clinics on a full success fee basis as an M&A support institution certified by the Small and Medium Enterprise Agency. Consultations are kept strictly confidential. Free consultation here