New PR Video Released for Work Style Reform in the Construction and Transportation Industries

The news of the release of a new PR video promoting work style reform in the construction and transportation industries also offers insights for business succession in the medical sector. Similar to other industries, medical institutions also face urgent challenges such as successor issues and the need for improved working environments, and the value of choosing third-party succession instead of closure or discontinuation of business is increasing. It is key for directors and clinic/hospital presidents to start preparations early, with a 5-10 year timeframe from around age 60, and to utilize specialized advisors focused on the medical industry to achieve smooth and optimal succession.

Urgency of Medical Institution Succession as Indicated by Work Style Reforms in Other Industries

The release of PR videos for work style reform in the construction and transportation industries may, at first glance, seem unrelated to medical M&A. However, it highlights urgent issues common to the medical industry: ‘improving working environments’ and ‘sustainable business continuity’. Particularly with the full implementation of ‘Work Style Reform for Doctors’ from April 2024, many medical institutions are required to comply with regulations on doctors’ working hour limits, making a review of management and medical service systems unavoidable. In this environment, for medical corporations and clinics struggling with a lack of successors, strengthening their management foundation through third-party succession, rather than closure or discontinuation, and consequently improving working environments, can be a crucial option.

Strategic Preparation with a ‘5-10 Year Timeframe’ in Medical Corporation Succession

The timeframe of ‘directors and clinic/hospital presidents preparing with a 5-10 year span from around age 60,’ as highlighted in the news, contains highly realistic and important implications for business succession of medical corporations. Compared to general business succession, M&A for medical corporations requires extensive specialized knowledge and time, covering aspects such as the type of medical corporation (with or without equity interest), consideration of transition to a fund contribution model, procedures for changing members and directors, maintaining facility standards for medical fees, succession of various licenses and permits, and valuation of medical equipment and real estate. Particularly for medical corporations with equity interest, calculating the valuation of equity interest is complex, and consideration for capital gains tax is essential. These processes cannot be completed in a short period; to achieve strategic M&A and maximize the corporate value of a medical institution, preparation from a long-term perspective of 5 to 10 years is considered indispensable. By starting early, it becomes possible to consider the optimal choice from multiple succession schemes (business transfer, equity transfer, merger, etc.) and conduct negotiations with ample time.

Specificity of Utilizing Medical M&A Specialized Advisors

Utilizing ‘support organizations specialized in the medical industry’ holds the key to successful M&A for medical corporations. A deep understanding of specialized laws such as the Medical Care Act, the Medical Practitioners’ Act, and the Pharmaceuticals and Medical Devices Act, which are difficult for general M&A brokerage firms to handle, is essential for medical M&A. For example, specialized knowledge unique to the medical industry is required for selecting appropriate acquiring candidates through medical service area surveys, maintaining facility standards and designation as an insured medical institution, adjusting employment conditions for medical professionals, and providing advice on administrative procedures and medical fee claims after M&A. Furthermore, for the selling side, negotiation skills to appropriately evaluate the medical institution’s value and achieve a transfer under optimal conditions are crucial; for the acquiring side, PMI (Post Merger Integration) support to facilitate a smooth management transition after succession is also important. It is presumed that such specialized and multifaceted support can only be difficult to provide without a specialized advisor focused on medical M&A.

If you are considering the succession or M&A of a medical corporation or clinic, please utilize our free quick assessment or individual consultation (strict confidentiality, fully success-fee based).