Transactional Case Study
Health Care Services Company - Due Diligence
A health care venture capital firm with whom AVOS Life Sciences has worked closely over the years retained our firm to assist with due diligence on an investment in the consumer driven health plan space. AVOS and our venture capital partner understood the strong trend toward an empowered healthcare consumer and had been monitoring a number of leading indicators for consumerism within the U.S. healthcare environment, for example:
- Increasing medical costs year on year
- More informed consumers and greater health care focus on direct-to-consumer approaches
- Payers passing through more of the premium increases to employers
- Employers no longer willing or able to fund all of the incremental costs for medical care to employees, their families, and retirees
This particular investment opportunity was a series B-2 investment round in one of the pure play consumer driven plan companies ("Company").
Interacting as part of an integrated due diligence team, AVOS focused upon market due diligence and competitive due diligence issues. AVOS quickly structured an approach to address the fundamental issues that would characterize the return potential for our client's investment:
- Market opportunity for the Company, particularly over the next 2-3 year enrollment cycle
- Perception of Company vis-a-vis competition within this market
- Ability and likelihood of large carriers (Aetna, United, Humana, Cigna, Wellpoint) to dramatically pursue and impact the Consumer Driven Health Plan (CDHP) market within next 2-3 years
As part of this formal due diligence effort, the AVOS team performed extensive secondary and primary research in a series of detailed one-on-one interviews with customer prospects, customer accounts where the Company both won and lost business head-to-head with competition, intermediaries such as brokers, consultants, or actuaries, and both present and former health care executives from large carriers.
Our work informed the venture capital client to make the investment and, only ten months later, the Company was acquired by a large carrier.
This initial due diligence work also put AVOS personnel in close contact with the Company executive management team. Subsequent to the due diligence process and close of the transaction, Company management retained AVOS to assist with two follow-on projects:
- A strategic market landscape analysis to segment the marketplace in terms of likely adoption of CDHP and assess Company positioning vis-a-vis competitionagainst an evolving set of customer needs
- An operational sales process review to align the organization and its selling approach and capabilities with the evolving CDHP marketplace
