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Analysis

Health Services Deals Rose in Value, Declined in Volume During Q3

By Jack O'Brien  
   October 25, 2019

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.

Related: Why Some See Healthcare's Vertical Mergers as Good and Necessary

"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. 

Related: Hospitals Claim Their Mergers Reduce Costs, Disputing Other Studies

Related: Health System M&A Activity Thrives Due to Megamergers

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 states’ 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.

Related: Healthcare Industry Most Focused on Consolidation, Consumerism in 2019

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


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