Shifting to higher value
health care
did you know?
RI's health care team has come an awful long way in just two years. From an
ambition, the notion of embedding this sector into the customer focus strategy
has become a tangible reality - as the more than 300 clients in 20 countries
proves. For the second international health care conference, over 50
relationship managers, analysts and product specialists were invited to share
experience and ideas. 'Clearly we've done the ground work,' comments global
business manager for the sector, Arnold Kuijpers. 'Now it is time to shift our
focus to higher value products.'
Senior diagnosis
Cost cutting
Customer leverage
Competitive edge
Product focus
Knowledge base
4 What'sNewS Issue 11 November 1998 1^ f X
Rik van Slingelandt took advantage of an
invitation to open the conference to
hammer home the need for an evolution
in the products and services we offer to
customers. 'Even the very rich Rabobank
cannot continue doing only credit,' he
stressed. 'Credit consumes solvency and
we do not have an endless supply. This
doesn't mean we will stop doing lending,
but there is an urgent need to create other
products, other structures which will not
make excessive demands on our solvency.
That is why we are rolling out the
customer focus strategy and will continue
to do so as an ongoing process. That is
why we are building up our range of
investment banking products. Our goal
for some time now has been a shift from
investing in our customers through
lending to an intermediary role in which
we can add value. Building those skills
will not be painless, but the diagnosis is
that the pain is temporary.'
'We are all finding that getting into
investment banking products is a new and
sometimes difficult exercise. And getting
these activities geared to what people
want to accomplish is also taking time. At
the same time, there is also something of a
The US accounts for more than 50% of
health care business world-wide.
This year's Health Care Award went to Paul
Nash of project finance whose three private
finance initiative transactions with hos-
pitals in Dartford, Durham and Edinburgh
have put Rl firmly on the sector map. More
on this kind of transaction in a later issue of
What's NewS.
crisis going on world-wide. That is
hurting us. Our operational results are
alright. But we are having to make huge
provisions, so huge they are swallowing
any positive results we may have achieved
in these difficult circumstances. This is the
underlying context behind all the cost
cutting. And I have to say that these cuts
are essential if we are to survive.'
Van Slingelandt's introduction would set
the tone for the rest of the conference
whose program was already heavily
oriented to knowledge transfer on
potential products and services that are
becoming or will be available to clients.
For these two full days, our health care
people from all over the world also had
the opportunity to pass on their own
knowhow. But primarily the conference
was intended to equip them with ways
and means to leverage the growing cliënt
base and begin the process of offering
higher value products. 'When we first got
together two years ago,' Kuijpers says,
'we had a lot of questions and few
answers. Over time, we have shown that
RI's health care focus is a very attractive
proposition for customers. And there are
numerous opportunities, both in the
developed world and emerging markets
for the kind of focus and expertise we
have to offer.'
Traditionally, RI has been strong in
domestic health care sectors in the
Netherlands and the US - a strength that
is hardly surprising as we took over the
existing Dutch portfolio and our initial
pilots and forays into the international
sector focused on the US. If we have
learnt anything, it seems, from working in
these markets, then it is the fact that no
two national markets are the same and
some even differ internally - the US being
a classic example. 'There is no magie
formula that applies to every market,'
says Kuijpers. However, that does not
mean that experience and knowhow
gained in one market cannot be applied in
another. This could potentially be RI's
winning card. To date, few international
financial institutions ventured into health
care on any kind of global scale. This
sector was left to domestic operators
because they know the risks. The fact that
Rl is willing to invest in the kind of
industry knowledge crucial to managing V
risk gives us a truly competitive edge.
For organization and focus purposes, the
health care sector has been broken down
into three tnain areas: providers, such as
hospitals; pharma/biotech; and devices. At
present, our customers are drawn
primarily from among health care
providers, with some 10% in pharma and
devices. Products tend to be straight
lending or credit related. It is these figures,
healthy though they may be, which the
international team plan to change in
favour of higher added value. This is why
the conference was designed in two parts.
The first day was devoted exclusively to
product information. F.quity placements,
M&A, project finance, structured finance^B
and, yes, credit - all were discussed at
length by specialists, often dedicated to
providing health care products, such as
Gerard Gregg-Smith of M&A and Paul
ffolkes Davis of the equity department
which has a strong pharma and biotech
contingent (see special, pages 7 to 14).
For rnany of the relationship managers
hungry for products, the message from
these specialists was that most of the
structures they want are far from off-the-
shelf. While the examples of fiscal
structuring look fairly straightforward
when seen on an overhead, specialist Peter
Sugarman also pointed out that every
customer is different and needs a
different, tailored approach. Developing a
new structure can take up to six man-
months. The same message was delivered
by other product people - we're certainly
building capacity, but the specialists
themselves are still relatively thin on the
