Building A Multinational Digital Healthcare Company Requires Strategic M&A

Eufemia Didonato

Ranjan Singh is co-founder and CEO of HealthHero.

The complexity of the global healthcare market and the intrinsic differences between regions — from institutions and reimbursement to health insurance structures and regulations — means that any effort to successfully scale a digital healthcare company requires more than startup ambition. It requires strategic mergers and acquisitions, alongside organic growth and product development.

There are many fundamental misconceptions when it comes to M&A. As founders, it’s not uncommon for us to see ourselves as Davids in a world of Goliaths: the small, scrappy underdog challenging incumbents by disrupting outdated and inefficient systems that have somehow been holding the world back.

The idea of startups growing through M&A can sometimes seem like a contradiction to this narrative. The entrepreneur’s mind turns to associated words like “roll up” – when a company with deep pockets buys up a number of independent dentist offices and calls them a chain, for example. 

While sometimes this reputation has been well-earned, tarring all M&A with the same brush omits the fact that there are times when building a solution from scratch — especially in a sector as complex as healthcare when your mission is to improve more than one narrow slice of it — makes less sense financially and for the end user. This is true if the acquisition being made fills a clear opportunity within the company’s broader offering and means that it can offer end-user value faster, or if it unlocks expertise or intellectual property that could not be as easily or as efficiently engineered within the company organically.

The Healthcare Industry And The Pandemic

The digital healthcare sector has been steadily growing for years. However, the healthcare sector itself has been notoriously slow in adopting innovation — until, at least, the Covid-19 pandemic hit and forced what some industry commentators have described as “ten years of market evolution in ten weeks.”

Driven by necessity, the healthcare sector demonstrated just how capable it is of adopting new innovations such as telehealth solutions for remote consultation at scale and accelerated speeds. In turn, this was matched by a massive influx of investment into the digital healthcare market. 

With more venture-backed digital healthcare entrants into the market than ever before, there will be an inevitable period of consolidation in the years to come as solutions for individual use cases are integrated into wider platforms. A report from Deloitte has predicted the acceleration of M&A activity in the post-pandemic period, in stark contrast to an actual decline in healthcare deals in 2019.

An Industry That Requires M&A

The buoyancy of the digital healthcare market means that there is a great opportunity for startups looking to scale. There have never been more solutions for different treatment use cases in the market, from new tools for digital consultations to AI-augmented diagnosis. There has also never been so much appetite for adoption among healthcare professionals and end users. Take smart online symptom checkers, for example: In one recent study, 80% of patients saw them as useful and, of those, 90% said they would use them again.

There is always an understandable temptation for founders to try to scale their businesses purely through organic growth as, in theory, it gives them greater ability to keep tight control over their product offering without compromise. However, when building a company across multiple geographies and use cases in healthcare, this model is fundamentally doomed to fail because it cannot account for the complexity and nuances of healthcare across different markets. 

Even within Europe, there is great disparity between countries’ healthcare systems in regulation, institutional structure, healthcare culture, patient preferences, technological adoption and the list goes on. Let’s just take one aspect as an example: payment for healthcare services. The United Kingdom has the National Health Service, with the majority of the population not paying at the point of care. Just over the Irish Sea, Irish citizens also have a universal healthcare system but are charged for government-subsidized services. 

The idea that a single solution (say, a U.K. digital GP consultation) could be carbon copied to another geography (like France) or to a different use case (like mental health support) is at best naive, and at worst arrogant. 

Working With The Healthcare Industry And Not Against It

An entrepreneur trying to shoehorn their solution into new use cases or geographies might imagine that they are disrupting the healthcare industry. However, those of us working within the healthcare sector will appreciate that the last thing it needs is abrupt disruption. 

Instead, entrepreneurs should be thinking about how they can work in partnership with national healthcare systems to help them provide efficient, high-quality care and address urgent capacity challenges with a genuine and deep understanding of the complexities involved. 

Again, this is where M&A has advantages: Instead of focusing on one specific use case at a time, which can be very fragmented and difficult to manage for healthcare practitioners, best-in-breed solutions can be integrated to provide a holistic service. It is much more reasonable to expect healthcare professionals and their patients to interact with one platform, rather than multiple different products for different treatments.

Strategic M&A

Of course, M&A is not the only strategy entrepreneurs can pursue, and there is no reason they cannot continue to build their own solutions and capabilities within their company. It is another common misconception that a company either grows exclusively organically or exclusively through M&A when in reality most of the highest performing scale-ups combine elements of both. 

While an element of strategic M&A is the only viable way to scale a company within the healthcare industry, the emphasis has to be on the strategy. Acquiring a number of digital health solutions without a clear plan of how they integrate, complement each other and provide access to new markets is bound to end in failure. However, done properly, strategic M&A can harness the specific expertise of a market or use case and enhance it with the power of greater resources.


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