Overpayment, missing growth strategies are major mistakes in healthcare mergers, Deloitte says

With healthcare mergers and acquisitions surging over the past several years, strategies are emerging that could guide health systems to ensure the right deals are made, as well as missteps to avoid, said consulting firm Deloitte.

Mistakes, according to Deloitte's new report, include having an undefined growth strategy, one that doesn't clearly consider the role that a merger or acquisition will play in its growth.

Overpaying is another mistake that often happens as the volume of deals escalates. In "merger waves" -- periods of accelerated M&A growth -- there are four distinct phases. Bid premiums in phase one have averaged just 10-18 percent since 1980; premiums rise to 20-35 percent in phase two, reach beyond 50 percent in phase three, and could surpass 100 percent in phase four. That final phase in where a lot of costly deals are struck, often leaving lost value in its wake.

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Companies that avoid this fate, dubbed "advantaged acquirers" by Deloitte, share some common characteristics, including self-assessment. According to the report, a company's executive team should assess the organization's strengths, weaknesses and opportunities for growth, both in revenue and value; essentially, they should develop a strategy to complement their strengths and offset their weaknesses.

Advantaged acquirers that have conducted a careful assessment typically know if their deal is going to comprise 10 percent of their growth, 20 percent or more. As part of that process, they've likely identified priority pathways at the business-unit level that address new products or solutions they plan on bringing to market at prices that are attractive to consumers.

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It's also important to look at the competition's strategic intent, said Deloitte. A lot can be learned from examining others' merger deals over the last several years in terms of geography, capabilities, size, product offerings and targeted customer segments. The idea is that past behavior will often foreshadow which acquisition targets may be next on their priority lists; with that information, acquirers can determine if the deal they're considering actually makes sense.

Strategic screening is vitally important, the report said; it can be used to create priorities of M&A candidates considered top priorities. Size, geography, technology and talent can all be used as filters in this regard. This helps senior executives and the board understand why a particular target was earmarked for acquisition.

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Above all, said Deloitte, disciplined execution is needed; for example, if there's a potential for culture issues or distribution gaps, acquirers should factor those into the screening process.

According to data compiled by Bloomberg, companies had spent $3.8 trillion on M&A by the end of 2015. That was the highest amount ever recorded for a single year.

Twitter: @JELagasse