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