- Deal volumes for health services are holding steady in 2023, even as the sector faces headwinds like high interest rates, increased regulatory scrutiny and other macroeconomic concerns, according to a report by consulting firm PwC.
- The analysis found deal volumes declined 4% in the 12 months ending May 15, 2023, compared with 2022, and deal value declined 15%.
- However, the firm is “optimistic” about healthcare merger and acquisition activity for the rest of 2023, arguing corporate and private equity players have plenty of cash to spend and health services companies face a climate that demands adaptation and change.
Dealmaking soared over the past two years in the health services sector, and PwC noted volumes are “resilient” despite the dip shown in the most recent report. Overall, the report tallied 1,661 deals valued at $85.2 billion from May 2022 through May 2023.
Although deals declined from 2022 and rose slightly compared to 2021, deal volume is still significantly higher than the pre-pandemic period. In 2018 and 2019, health services companies notched 828 and 856 deals, respectively.
The bulk of the deals by value — 546 purchases worth $38.2 billion — fell into a bucket of services that included contract research organizations, ambulatory surgical centers and home infusion companies.
More than half of the total deal value stemmed from megadeals, or purchases worth $5 billion or more, including CVS Health’s purchases of primary care provider Oak Street Health and home care company Signify Health; Walgreens-backed VillageMD’s acquisition of Summit Health; and the private equity deal with CRO Syneos Health.
The period included six megadeals in total. Three of those deals — the purchases of Signify, Summit and Syneos — accounted for $26.6 billion of the value included in the $38.2 billion other services category.
Home health and hospice deal volume declined 8%, while the value of that M&A activity declined 33%. Deal volume and value declined for labs, MRI and dialysis companies, behavioral health providers and rehabilitation services.
Meanwhile, the volume of hospital deals bumped up 6% and the value of those purchases increased 8%. A recent Kaufman Hall report found hospital M&A activity stayed steady in the first quarter this year, noting deals are trending toward cross-regional partnerships that could help them evade regulatory challenges they face while expanding in their existing market.