PwC: Healthcare M&A still pacing strongly
- The healthcare market continues to see steady M&A activity, according to a new report from PwC. For the 12th quarter in a row, the industry saw over 200 deals, according to the analysis.
- Long-term care was the largest sub-sector by deal volume (71), a continuation of a long-running trend. The number of hospital deals (15) was down 21% by volume year-over-year.
- However, Thad Kresho, U.S. Health Services Deals Leader at PwC, told Healthcare Dive he expects the hospital market to continue seeing M&A activity, in part because private equity investors are sophisticatedly investing in the industry. The prices for companies are trending upwards, including in the labs/imaging, home health and managed care spaces.
The total deal value over 211 deals in Q3 for the industry was $17.4 billion, a 16% year-over-year decrease versus the time period a year ago and 65% decrease over last quarter. While the value may have been a decrease, Kresho says the overall trending activity is similar to past years.
"Healthcare is very active from an investor standpoint," he told Healthcare Dive. In addition, a recent Kaufman Hall analysis posits hospital M&A is on pace to exceed last year's activity of 102 deals.
Anu Singh, managing director of Kaufman Hall, recently told Healthcare Dive that the activity is symptomatic of an industry in transformation. "Health systems are under pressure to ensure they have the right assets in the right place to optimize care," Singh said.
Indeed, pressure is coming from activist investors in the space as health systems' stocks trend downward. Public companies like Tenet and Community Health Systems have both been divesting assets in order to shore up their debt load as reaction. Kresho believes such activity will continue and noted some properties can be sold multiple times where they may be purchased in a portfolio and sold individually afterward.
The healthcare M&A has bucked traditional market trends as activity has continued in the face of uncertainty, Kresho said. From a hospital perspective, a lot of the activity will vary market to market based on local provider needs, population bases and available acquisitions. The evolution of the industry as a whole is leading toward companies seeking to tear down traditional, color-by-numbers barriers. As a huge example, CVS Health is reportedly in talks to acquire Aetna.
As healthcare companies look at decentralization and new environments and investors smartly look to market opportunities, expect deals that reach across the industry. And expect more deals. "I'll retire before it stops," Kresho joked.
- PwC US health services deals insights: Q3 2017
- Healthcare Dive The hospital divestiture trend is heating up, and not going away anytime soon
- Healthcare Dive As health systems' stocks trend downward, investor pressure rises
- Healthcare Dive The 5 drivers pointing toward the decentralization of healthcare
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