Dive Brief:
- A KPMG survey of 550 finance executives and M&A professionals found healthcare is expected to be the third most active sector for M&A, following the technology (first) and pharma/biotech (2nd) sectors.
- More than half (58%) of the healthcare industry respondents said large cash reserves will be the biggest driving factor, followed by consumer confidence (34%) and credit availability (29%).
- However, the survey results did indicate some cautionary flags - such as a slow-growth environment cited by 42% of respondents, rising interest rates (32%), and credit availability (29%), all of which could slow deal activity.
Dive Insight:
Bill Baker, who leads KPMG's Healthcare and Life Sciences Deal Advisory practice, said, "Companies are looking for geographic expansion and new markets to improve their prospects as healthcare adapts to changing reimbursement models." He added, "healthcare is facing a great deal of upheaval because of the profound changes influencing finance, regulation, supply chains, and technology, both for their own information systems and the science behind new treatments."
However, J. Preston Parker, principal for KPMG's Deal Advisory group, said, "Dynamics affecting M&A activity can change year to year or even week to week if there is a market shock of any sort. Beyond the external climate for deals, healthcare companies need to address the integration and separation issues that are necessary to deliver value from transactions."
KPMG Healthcare Provider solutions principal West Johnson said at a healthcare media event in Nashville it remains to be seen whether in the short-term the big insurance mega-mergers will lead to lower costs for consumers. But, in the long term, market demands will require that costs come out of the system, including M&A activity this year. "Cost is going to come out because it has to," added Johnson.