Despite industry-wide uncertainty, analysts expect the rate of deals to remain consistent through the end of 2019.
The health services sector saw the value of deals increase by nearly 18% year-over-year in Q3 while the volume of deals fell by 16% over the same period of time, according to a PricewaterhouseCoopers (PwC) report.
The increase in deal value was due to twice as many deals exceeding $1 billion as usual, according to PwC, despite the absence of 'megadeals,' also known as transactions that exceed $5 billion.
Q3 2019 marked the first quarter that the total value of non-megadeals hit $20 billion since Q4 2017. However, the total volume of deals was 263, the lowest level since Q4 2017.
Still, despite industry-wide uncertainty, analysts expect the rate of deals to remain consistent through the end of 2019.
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"Health services deals activity appears relatively unchanged in the face of macroeconomic concerns, as companies grapple with long-standing trends. These trends are likely to continue to influence deals through the remainder of 2019," the report stated.
Volume of deals by sub-sector:
- Long-term care (38%)
- Physician medical groups (17%)
- Other services (11%)
Value of deals by sub-sector:
- Long-term care (29%)
- Hospitals (25%)
- Other services (16%)
While hospitals experienced 24% volume growth, breaking with broader growth dynamic declines, the sub-sector also saw its deal values decline year-over-year.
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According to the PwC, many health services companies are pursuing mergers and deals as a way to navigate potential uncertainty related to health policy nationwide, specifically related "reimbursement pressure and statesโ differing approaches to implementing Affordable Care Act provisions."
Private equity is expected to remain a major player in the market, as PwC identified them as entities with high capital availability with an eye on physician practices and health technology firms.
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Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.