Quick Take: Healthcare Automation

Operating on tight margins and with lives at stake, healthcare providers are embracing automation as a way to ensure process quality while optimizing efficiency.

Here, senior members of the Harris Williams Healthcare & Life Sciences Group share insights on the top considerations for investors exploring opportunities in the healthcare automation solutions sector, with a special focus on pharmacy automation.

What makes healthcare automation—and specifically pharmacy automation technology—an appealing space for buyers and investors today?

Dixon: Pharmacy automation technology is aligned with several powerful tailwinds in the broader healthcare sector. Automation technology directly supports critical objectives: improving patient education and medication adherence, creating more efficient workflows that drive labor savings, reducing drug diversion, and increasing compliance. Within pharmacies, automation technology solutions can track medications in real time from end to end, eliminating diversion and ensuring full accountability throughout the chain of custody. By significantly reducing administrative tasks, automation tools also enable pharmacists to be more heavily integrated in clinical roles and counseling, improving medication adherence and the patient experience.

Will: Driving better medication adherence is a significant theme in the industry. Insurers and hospitals want patients to be taking the right drugs at the right time as soon as they are discharged from the hospital, reducing costly readmissions. Better adherence, and therefore fewer readmissions, drives efficiency and cost reduction for the entire system, which is a key focus for payors and providers in the movement to value-based care. Innovative technologies that can improve medication adherence will remain in high demand and are driving growth in the broader sector.

Mahoney: Another attractive element of assets with automation technology solutions is an opportunity for recurring revenue. In addition to the one-time sale, most companies also provide periodic, contractual maintenance and support that lasts throughout the equipment's life.

What advice do you have for prospective buyers interested in this space?

Will: There is a universe of attractive assets in the broader healthcare automation sector, and strong industry tailwinds have created an attractive opportunity for investors. As consolidation continues within this space, the companies that emerge as leaders are likely to share several common characteristics.

For instance, proprietary technology protected by intellectual property is critical to maintaining a defensible market position and sticky installed base. In addition, having long-term maintenance and support contracts drives a high degree of visibility into future performance. This has become even more important post-COVID-19, as recurring revenue helped companies maintain stable performance through the pandemic. Finally, companies that focus on large and growing end markets such as integrated delivery networks (IDNs) and retail are well-positioned for continued growth as these markets continually increase their use of automation technologies. The future is bright in this sector for innovative companies with a growth mindset.

For more information, please contact our senior bankers.

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Published April 2021
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