...Lateral Plays More Prevalent: Consolidation among healthcare providers has been on the rise recently. Increasingly, this activity is not limited to plain-vanilla horizontal mergers; transactions focused on lateral consolidation, which Fitch Ratings defines as a single company operating in more than one care-delivery vertical, have become more prevalent. These transactions present unique risks to the credit profile and force investors to ask: Is the whole greater than the sum of the parts? Looking Beyond Scale: Scale in healthcare delivery brings clear financial benefits. The industry uses horizontal consolidation within a single care-delivery vertical as a valuable tool to manage secular headwinds to organic growth and profit margins. Cost synergies are an obvious driver of return on investment due to relatively high operating leverage, and integration is a straightforward, if not a categorically low-risk, process. In a horizontal consolidation, management knows the business and the transaction...
