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By Market Intelligence Team

Monday, August 24, 2009

I recently facilitated a workshop for the Foster Family-Based Treatment Association with over 35 senior administrators for treatment foster care programs across the nation. During the workshop, I found that nearly everyone in the room had discussed the idea of a merger or acquisition (M&A) over the past six months.

About half of the administrators were actively exploring an M&A. The other half have been approached by other provider organizations seeking a merger or seeking to be acquired. For many, the current economic crisis has been the impetus for this increased interest in M&A. Although this may be one compelling reason to consider mergers or acquisitions, there are a number of critical issues that  need to be considered before going forward. First, you need to clearly decide why your organization is considering M&A. Is it:

  • To enhance efficiencies and reduce administrative costs?

  • To improve market share?

  • Because organic growth is not possible due to a saturated (or shrinking) market?

  • To purchase clinical and/or programming expertise?

  • Because the founder or long-time CEO is leaving and this is a natural transition plan?

  • Because funding sources in many states prefer consolidation to deal with fewer providers, and integrated services to allow for ‘one-stop shopping?’

Any or all of the above may be sound arguments for pursuing an M&A strategy, but it is necessary to explore an M&A as part of your organization’s overall strategic planning process. Ask yourself, “Is everyone clear about the strategic rationale for considering a merger or acquisition, and about the potential benefits and barriers? Does a M&A strategy advance the organization’s mission?” If your organization has not formally developed a M&A strategy as part of its overall strategic plan, I would suggest that you do so. This should include the M&A strategic goals, approach (being acquired or acquisition strategy), and criteria for strategic partners. This is a critical decision to make during a critical time.

Sincerely,
Steve Howe, M.S.W.
Senior Consultant, OPEN MINDS

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Additional Free Resource

To read about Florida’s interagency coordination agreement impacting foster care education, access, “Five Florida State Agencies Sign Compact To Improve Foster Care Education.”

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