Testing the growth case for a healthcare purchasing group.

Client context

The business context.

An investor was assessing a healthcare group purchasing organization that combined purchasing agreements with services for hospitals and other care providers. The investment case included growth in the core business, acquisition opportunities and adjacent procurement software offerings.

Purchasing volumes, fee levels, customer penetration and software adoption each had different economics. The diligence needed to test these drivers separately and determine where the management plan depended on demanding assumptions.

The work

How the engagement was delivered.

• Test the sources of core growth

  Separated underlying market growth, deeper category penetration and customer wins. Assessed purchasing volumes and fee assumptions using management information, market data and interviews with purchasing organizations, healthcare providers and industry specialists.

• Assess the reasons customers stay or switch

  Examined procurement expertise, supplier choice, service breadth and tender support. Reviewed contractual, administrative and IT migration barriers alongside competitive threats and the scope to win customers in adjacent segments.

• Evaluate digital products on their own economics

  Assessed food-procurement and hospital inventory software, including customer value, competition, pricing and implementation costs. Distinguished basic reporting functionality from services that could support customers’ willingness to pay.

• Challenge the investment assumptions

  Built an independent view of commercial growth and reviewed potential acquisition targets. Identified where customer acquisition, software adoption and implementation economics required more cautious assumptions or a different go-to-market approach.

What changed

A differentiated view of growth potential and execution risk.

The diligence supported a view of the group’s competitive strengths while challenging selected management assumptions. At the time of the engagement, it identified opportunities in purchasing penetration and digital services, together with adoption and implementation barriers that affected their economics. The output informed the investment assessment; it did not establish a completed transaction or realized revenue growth.