Application of various restructuring methods for ensuring survival of healthcare business such as hospital, clinic, maternity, trauma center, wound care center, cancer center, heart center and other specialist health centers

1. Healthcare Business Survival
Through Restructuring
Dr. Elijah Ezendu
FIMC, FCIM, FCCM, FIIAN, FBDI, FAAFM, FSSM, MIMIS, MIAP, MITD, ACIArb, ACIPM,
PhD, DocM, MBA, CWM, CBDA, CMA, MPM, PME, CSOL, CCIP, CMC

2. “You will either step forward into growth or you will step back
into safety.” – Abraham Maslow
“Without continual growth and progress, such words as
improvement, achievement, and success have no meaning.”
– Benjamin Franklin
“The strongest principle of growth lies in the human choice.”
– George Eliot
“It is not the strongest of the species that survive, nor the most
intelligent, but the one most responsive to change.”
– Charles Darwin
Ice Breakers

3. What is Restructuring?
“Restructuring can be construed as action for change in financial
structure, business portfolio or ownership so as to increase the
value of a firm.”
Source: Elijah Ezendu, Restructuring
“A significant modification made to the debt, operations or structure
of a company. This type of corporate action is usually made when
there are significant problems in a company, which are causing
some form of financial harm and putting the overall business in
jeopardy. The hope is that through restructuring, a company can
eliminate financial harm and improve the business.”
Source: Investopedia
“A fundamental change in the way in which an organisation is
structured that may involve increasing or decreasing the various
layers of staff between the top and the bottom of the hierarchy or
re-assigning roles and responsibilities within it.”
Source: HRdictionary.com

4. Driving Forces of Restructuring
 Advancement in Technology
 Stock Market
 Increasing Competition
 Globalization
 Regulatory Shift
 Inability to Attract the Right Experts
 Evolution of Subsidiaries
 Correction of Valuation Blunder
 Decision-Making Dynamics
 Structural Paralysis
 Rambling Business Model
 Collapse of Strategy
 Industry Trend
 Utilization of Opportunities

5. Financial Perspective of Restructuring
Assets Liabilities
Operating
Cash Flows
Debt
Equity
Either
Reorganize
the
Business
Or
Reorganize
the
Financing

6. Types of Restructuring
1. Portfolio Restructuring: Reducing or
Increasing a firm’s business. For example,
acquisition or spin-off
2. Financial Restructuring: Altering a firm’s
capital structure. For example, LBO
3. Organizational Restructuring:
Rearranging the organizational structure,
system or design template of a firm. For
example, downsizing.

7. Alliance
Alliance is definite agreement
between firms such that each shall
commit resources to achieve
common set of objectives.

8. Alliance in Medical Practice
Alliance provides unlimited opportunities for
medical practitioners to build, nurture and
harness partnership resources for resolution of
effectual synergies, in pursuit of individual
career objectives.

9. Rationale for Alliance

10. 10 Steps to Successful Alliance
i. Establish clear strategic purpose
ii. Find a fitting partner
iii. Allocate tasks according to competencies
iv. Create incentives for cooperation
v. Minimize conflict between partners
vi. Encourage continual communication
vii. Exchange personnel
viii. Operate with long time horizon
ix. Develop multiple joint projects
x. Be flexible

11. Determinants of Success in Alliance
Source: Elijah Ezendu, Alliance Development
Alliance

12. Types of Alliance
1. Joint R & D
2. Licensing
3. Preferred Suppliers
4. Co-Marketing
5. Coopetition
6. Minority Investment
7. Joint Production
8. Equity Joint Venture
9. Multi-Partner Consortia
10. Outsourcing
11. Collaboration

13. Collaboration in Medical Practice
Collaboration is one of the most extensively
implemented alliance in medical practice. It
allows for practitioners to leverage expertise of
others so as to provide an endearing level of
customer satisfaction to clients.

14. “To increase access to health care, enhance
quality and manage costs, we must embark on a
process of collaboration and interdependence.”
- Prof Morgan Chetty, Practice Matters: Collaboration and Interdependence ( Medical Chronicle)

15. Types of Collaboration
• Loose Collaboration
• Definite Collaboration

16. Loose Collaboration
This is an unstructured agreement between two
or more practitioners/clinics/medical centers for
handling cases together or effecting referrals.
It’s usually established through ‘word of mouth’
engagement devoid of broad clarification.
The major problems of loose collaboration stem
from challenging expectation management and
lopsided consideration.

17. Definite Collaboration
It’s a structured agreement between two or
more practitioners/clinics/medical centers for
handling cases together or effecting referrals. It
should feature a clear framework of relationship
showing standard of work, performance
expectations and mutually acceptable
consideration well-crafted as tenets of an
endorsed Memorandum of Agreement (MOA).

18. Benefits of Collaboration
• Provides enablement for achievement of
customer-centred service.
• Enhancement of customer satisfaction.
• Facilitates management of clients (patients)
throughout the collaborative value network.
• Gives room for accelerating quality of service
throughout the collaborative value network.
• Boosts interdisciplinary communication and
productivity.
• Builds a lock-in system for promoting customer
engagement

19. Exercise
Dr Johnson is a medical practitioner, who owns
a small-size clinic that has a ward-strength of 6
patients. What alliances can he develop for
enhancing total services?

20. The Phases of Alliance

21. Interconnectivity of Strategy and Capability
Competitive
Strategy
Alliance
Capability
Alliance
Strategy
Alliance
Design
Alliance
Implementation
Alliance
Management
Review

22. Factors that Determine the Right Partner
i. Complimentary objectives
ii. Complimentary capabilities
iii. Proportionate risks
iv. Controllable rivalry
v. Compatible management styles

23. Problems of Strategic Alliances
 Risk of too much dependence
 Risk of skill drain
 High cost of operations
 Difficulty in integration
 Risk of losing secrets
 Incompatibility of firms
 Absence of clear details of
responsibilities

24. Coopetitive System of Value Creation
This is a strategic interdependence that
emerges between diverse firms due to
blending of competition and
cooperation.
Competition Cooperation
Coopetition
Source: Elijah Ezendu, Restructuring

25. Coopetition Strategy
Coopetition strategy is a type of inter-firm
strategy which permits and constrains the
competing firms involved in alliance to
manage a partially convergent interest and
goal structure while creating value by means
of coopetitive advantage.

26. “The physicians find themselves in certain
situations where cooperation is appropriate. A
strategic relationship with a hospital may
require some occasions of cooperation where
partnering on a joint venture may bring a new
service to the community while simultaneously
competing with the same hospital to provide a
different outpatient service.”
- Grace Terrell, Time for Coopetition is Now

27. “Do other opportunities exist for coopetition in
wound care? I believe they do. Let's consider
the possibilities for a moment. Visualize an ever-
expanding global wound care pie, with its slices
representing patients, practitioners,
manufacturers, educational conferences, and
accreditation and certification programs.
Imagine more and more entrants to the wound
care industry, joining forces with each other to
gain a piece of the greater pie.”
- Richard Salcido, Coopetition in Wound Care

28. Mergers and Acquisitions
A merger occurs when two or more
firms agree to move forward as a
single new organization, instead of
remaining separately owned and
operated.
Acquisition occurs when one firm takes
over another thereby establishing
itself as the new owner.

29. Reasons for Mergers and Acquisitions
• Financing
• Speedy external growth
• Risk Reduction
• Availability of exploitable situation
• Competition
• Hubris Hypothesis
• Sales enhancement and operating economics
• Improved management
• Better information about profitability and position of business
• Staff reduction
• Wealth transfer
• Management personal agenda
• Acquisition of superior technology
• Taxation
• Diversification

30. “The rules of healthcare are changing. Today,
growth isn’t about just getting bigger. It’s about
developing all of the components needed for
coordinated care and reduced costs.”
- Source: HealthLeaders Media, Hospital Merger and Acquisition Strategies

31. Merger and Acquisition Deal

32. Types of Mergers
The following are distinguished by relationship
• Horizontal Merger
• Vertical Merger
• Market-Extension Merger
• Product-Extension Merger
• Conglomeration
The following are distinguished by financing
• Purchase Merger: A firm pays for another with cash
or debt instrument such as bills, bonds, certificates
of deposit, banker’s acceptances
• Consolidation Merger: Merging firms are bought
and combined under new entity

33. Types of Acquisition
• Conventional Acquisition: A firm buys another with
cash, stock or combination of the two.
• Acquisition by Asset-Purchase: Company A buys all
the assets of Company B for cash, then Company B
will have only cash (and whatever debt they had
before) and become a shell, which may eventually
liquidate or enter another area of business.
• Reverse Merger: A private firm in a bid to raise
financing buys a publicly listed shell firm, and
moves thereinto in so doing become an entirely
new firm with tradable shares.

34. The Rise of Fortis Global Healthcare
Holdings Pte Ltd Through Acquisition
Fortis acquired Hong Kong-listed Quality Healthcare Asia Ltd (QHA) for about
Rs 882 crore. With this Fortis Global got a network of over 60 wholly-owned
medical centres, over 500 affiliated clinics, over 40 dental and physiotherapy
centres, and a private nursing agency with a database of over 3,000 nurses in
Honk Kong.
Then it offered to pick up controlling stake in the Australia based Dental
Corporation. Dental Corporation is the largest operator of dental practice in
Australia and New Zealand with presence in 135 locations.
Fortis Global has also announced the acquisition of a cancer speciality
hospital project in Singapore for Rs 115 crore.
Adapted from The Hindu Business Line

35. Competitive Intelligence in Inter-firm Relationships
Competitive Intelligence should be used for generation of equitable due diligence
report highlighting the following:
 Return on Investment (ROI)
 Compounded Annual Growth Rate (CAGR)
 Gross Profit Margin (GPM)
 Production Capacity to Fill
 Product/Services Mix
 Cost Structure
 Customer Satisfaction/Loyalty
 Intellectual Property Portfolio
 Competitive Differentia
 Corporate Culture
 Talent Mass
 People/Knowledge Acquisition
 Employee retention
 Liabilities
 Deal complexity and risk
 Ownership structure
 Strategic Motive of Relationship
Ascertainment of Strategic gap, which is the difference between current and
desired state.

36. Why M & A Fails
1. Deals done due to highly rated stock without proper strategic
analysis
2. Imitation of industry trend
3. Action was driven by idiosyncrasy instead of business strategy
4. Action was done for personal glory
5. Erroneous influence from bankers, advisors and lawyers
6. The goal of buying a stiff competitor can be misleading
7. Fear can induce firms into defensive mergers
8. Post-Merger problem of managers trying to cope with integration
9. Irreconcilable differences in corporate culture
10. Focus on cost-cutting while neglecting revenue momentum
11. Passion of top management for deal bonus regardless of outcome
12. Lack of communication
13. Incorrect due diligence report
14. Loss of key personnel

37. Divestiture
This is the outright sale of a firm’s asset,
division or subsidiary either as a
fundraising measure or strategic
alignment aimed at eliminating unfit
organizational components or in defense
against take over or due to low
profitability.

38. Equity Carve-Out
A parent firm makes a subsidiary public
through IPO, and selling small
percentage to the public while keeping
controlling stake.

39. Reasons for Equity Carve-Out
i. Focused management
ii. Unlocking hidden value
iii. Tax Factors
iv. Impetus of growth strategy
v. Lack of strategic fit

40. Starbursting
This is the break-up of a star-like firm into
smaller firms by delineating core business and a
collection of other focus areas, giving room for
the parent company to concentrate only on its
core business and allow relevant business units
to spring up as individual firms, wherefore each
would concentrate on applicable focus area.

41. Advantages of Starbursting
• Development of Focused Management
• Effective Distribution of Corporate Debt
• Development of Specialised Talents
• Reculturalization of Business Unit to Best Industry Fit
Instead of ‘One-Size Fits All’.
• Leadership Devolution to Business Unit.
• Boosting Aggregate Value for Shareholders.
• Increase in Operational Efficiency
• Appropriate Strategic Positioning to Explore and
Exploit Each Focus Area.

42. Spin-Offs
This occurs when a subsidiary becomes
independent company through
distribution of its shares to
shareholders of the parent firm, usually
on a pro rata basis.
It can’t be used for immediate fundraising.

43. Other Forms of Restructuring
 MBO
 EBO
 LBO
 ESOP
 Exchange Offer
 Troubled Debt Restructuring
 Workout
 Liquidation

44. Rightsizing
This involves ascertainment of targeted service
requirements, implementation of workload
mechanics for identifying distinct job
contributions, execution of job redesign for
effectuality, repositioning of job roles and
development of performance-fitting structure.

45. Rightsizing usually give rise to shrinking of
oversize units, expansion of understaffed ones,
as well as establishment of new essential
sections or departments.

46. Downsizing
It’s a type of organizational restructuring
that focus on streamlining, tightening
and shrinking organizational structure
with respect to workforce.

47. Alternatives to Downsizing
• Early retirement as a method for inducing voluntary
shrinkage
• Establishment of programmes for trimming waste
• Across-the-board salary cut.
• Perform hiring-freeze and halt recruitment.
• Retraining employees, and adjust them strategically
• Transfer of employees from area of non-requirement
to necessities
• Reduction of the work-week
• Reduce the size of workforce by attrition
• Implement furlough
• Introduce contract labour into the workforce

48. Case Examples
1. Acquisition of Regency Hospital Company LLC
by Select Medical Holdings Corporation
thereby expanding network of acute care
hospitals from 89 to 112. Value of deal was
$210 million. Deal Date: June, 2010.
2. Acquisition of RehabCare Group by Kindred
Healthcare Inc for the purpose of penetrating
the market, reducing cost, while expanding
offerings and operational locations. Value of
Deal was $900 million. Deal Date: Feb, 2011.

49. Case for Review
Zinohive Medicare is a healthcare business that provides
services in 10 locations. It operates the following specialised
centres:
1.Trauma Centre
2.Wound Healing Centre
3.Paediatric Centre
4.Cancer Centre
5.Heart Centre
6.Maternity
The management intends to enhance total value to shareholders
and boost service growth. In your viewpoint, what is the best
restructuring option for the organisation?

50. Dr Elijah Ezendu is Award-Winning Business Expert & Certified Management Consultant with expertise
in Interim Management, Strategy, Competitive Intelligence, Transformation, Restructuring, Turnaround
Management, Business Development, Marketing, Project & Cost Management, Leadership, HR, CSR, e-
Business & Software Architecture. He had functioned as Founder, Initiative for Sustainable Business
Equity; Chairman of Board, Charisma Broadcast Film Academy; Group Chief Operating Officer, Idova
Group; CEO, Rubiini (UAE); Special Advisor, RTEAN; Director, MMNA Investments; Chair, Int’l Board of
GCC Business Council (UAE); Senior Partner, Shevach Consulting; Chairman (Certification & Training),
Coordinator (Board of Fellows), Lead Assessor & Governing Council Member, Institute of Management
Consultants, Nigeria; Lead Resource, Centre for Competitive Intelligence Development; Lead
Consultant/ Partner, JK Michaels; Turnaround Project Director, Consolidated Business Holdings Limited;
Technical Director, Gestalt; Chief Operating Officer, Rohan Group; Executive Director (Various Roles),
Fortuna, Gambia & Malta; Chief Advisor/ Partner, D & E; Vice Chairman of Board, Refined Shipping;
Director of Programmes & Governing Council Member, Institute of Business Development, Nigeria;
Member of TDD Committee, International Association of Software Architects, USA; Member of Strategic
Planning and Implementation Committee, Chartered Institute of Personnel Management of Nigeria;
Country Manager (Nigeria) & Adjunct Faculty (MBA Programme), Regent Business School, South Africa;
Adjunct Faculty (MBA Programme), Ladoke Akintola University of Technology; Editor-in-Chief, Cost
Management Journal; Council Member, Institute of Internal Auditors of Nigeria; Member, Board of
Directors (Several Organizations). He holds Doctoral Degree in Management, Master of Business
Administration and Fellow of Professional Institutes in North America, UK & Nigeria. He is Innovator of
Corporate Investment Structure Based on Financials and Intangibles, for valuation highlighting
intangible contributions of host communities and ecological environment: A model celebrated globally
as remedy for unmitigated depreciation of ecological capital and developmental deprivation of host
communities. He had served as Examiner to Professional Institutes and Universities. He had been a
member of Guild of Soundtrack Producers of Nigeria. He's an author and extensively featured speaker.

51. Thank You