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David Jasmund

E: djasmund@pcecompanies.com

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Industry Trends

Mega Healthcare Deals Demonstrate Resilient M&A Market

Despite high interest rates, increased regulatory scrutiny, and other macroeconomic concerns, healthcare mergers and acquisitions saw notable activity during the first half of 2023. CVS Health Corp took center stage with its Signify Health and Oak Street Health acquisitions. Walgreens-backed VillageMD also made headlines with its acquisition of Summit Health, as did the acquisition of Syneos Health by a consortium of private investment firms. These three deals amounted to a significant $26.6 billion in the healthcare sector.1

Larger Hospital Mergers and Growing Partnerships Take Center Stage

Transaction activity surged within the healthcare sector due to operational and financial challenges. Issues like frontline staff stress, post-pandemic inflation, and increased cross-regional partnerships impact the trend of larger hospital mergers. Mid-sized regional health systems seek partnerships while maintaining financial stability, aiming to balance their influence over local healthcare with the resources of larger systems. An example of this is Flagler Health+ announcing its merger with the University of Florida's academic health center, UF Health.2

New Legislation Adds Oversight to Healthcare M&A Landscape

California healthcare dealmakers should be prepared for increased M&A oversight with the introduction of new legislation. SB 184, signed into law a year ago, will come into effect next spring and establishes the Office of Health Care Affordability to analyze healthcare costs and review M&A deals. Healthcare entities will be required to provide written notice of proposed transactions at least 90 days before closing, raising concerns about the potential impact on deal timelines.3

Home-Based Care M&A Faces Challenges in a Complex Market Environment

M&A activity in the home-based care sector has become increasingly complex, with transaction volume dropping by 50% to 60% from 2021 to 2022. The scarcity of available inventory and the shift towards value-based care are two factors contributing to the slowdown in the lower- to middle-market. Tighter lending standards from banks and the need for more structured deals have made closing transactions more challenging and time-consuming. Private equity groups with industry experience and established banking relationships are likely to have an advantage in the current M&A environment. To attract PE attention, sellers should demonstrate growth and may require short-term debt for investments and acquisitions. Despite these challenges, valuations in the sector remain strong, especially for providers with higher revenue figures.4

Largest Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Oak Street Health, Inc.
  • CVS Health Corporation
  • $10,892.46
  • Prometheus Biosciences, Inc.
  • Merck & Co., Inc.
  • $10,876.63
  • Provention Bio, Inc.
  • Sanofi
  • $2,880.93
  • OneOncology, LLC
  • AmerisourceBergen Corporation; TPG Inc.
  • $2,100.00
  • CTI BioPharma Corp.
  • Swedish Orphan Biovitrum AB (publ)
  • $1,753.15
  • Heska Corporation
  • Antech Diagnostics, Inc.
  • $1,544.02
  • BAQSIMI worldwide and related assets of Eli Lilly and Company
  • Amphastar Medication Co., LLC
  • $1,200.00
  • Cardiovascular Systems, Inc.
  • Abbott Laboratories
  • $904.02
  • Apollo Endosurgery, Inc.
  • Boston Scientific Corporation
  • $699.21
  • Epic Staffing Group
  • The Pritzker Organization, LLC
  • $675.00

Other Financial Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Epic Staffing Group
  • The Pritzker Organization, LLC
  • $675.00
  • Grand Villa of St. Petersburg
  • Inspired Healthcare Capital
  • $28.99
  • An Optima Dermatology clinic
  • Four Corners Property Trust, Inc.
  • $9.30

Other Strategic Buyer Transactions Closed

  • Target
  • Buyer
  • Value($mm)
  • Ardent Health Partners, LLC
  • Pure Health LLC
  • $500.00
  • Haystack Oncology, Inc.
  • Quest Diagnostics Incorporated
  • $450.00
  • Option Care Health, Inc.
  • Undisclosed
  • $330.00
  • Satsuma Pharmaceuticals, Inc.
  • Shin Nippon Biomedical Laboratories, Ltd.
  • $219.03
  • Cibus, Inc.
  • Cibus, Inc.
  • $164.98
  • Flager Health+
  • University
  • n/a

 

Source S&P Capital IQ as of 7/5/2023 and PCE Proprietary Data

PCE Transactions

Contacts

David Jasmund

Orlando Office

407-621-2111 |

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Jon Gogolak

Orlando Office

407-621-2136 |

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Data Assumptions

This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

Glossary

EBIT - Earnings Before Interest and Taxes
EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
LTM - Last Twelve Months
TEV - Total Enterprise Value

Sources:

  1. 1. Olsen, Emily. “Health Services M&A Holding Steady Despite Economic Headwinds.” Healthcare Dive, 23 June 2023.
  2. 2. Horowitz, Brian T. “Larger Hospital Mergers Expected in Post-pandemic Market, Kaufman Hall Says.” Healthcare Dive, 17 Apr. 2023.
  3. 3. Adams, Katie, and Katie Adams. “How California’s New Legislation Could Affect Healthcare M&Amp;a Activity.” MedCity News, 13 June 2023.
  4. 4. Famakinwa, Joyce, and Joyce Famakinwa. “Buyer Interest Is Strong, but Home-Based Care M&A Environment Remains ‘Complicated.’” Home Health Care News, July 2023.
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