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PwC Mid-Year Report: Health Services Deal Volumes are 'Unprecedented'

Analysis  |  By Jack O'Brien  
   June 23, 2021

PwC attributed the increase in deal activity to several factors, including "capital availability, regulatory shifts, evolving competitive dynamics, promising technologies and commitments to patient-centricity."

Deal volumes in the health services sector this year are "unprecedented," according to a PricewaterhouseCoopers (PwC) report released Tuesday afternoon.

Following a slump in early 2020, coinciding with the start of the domestic spread of COVID-19, health services deals rebounded with 352 transactions in Q4 2020, a record for one quarter, only to be topped by 426 deals in Q1 2021. Additionally, the sector has seen six 'megadeals' valued at more than $5 billion. 

PwC attributed the increase in deal activity to several factors, including "capital availability, regulatory shifts, evolving competitive dynamics, promising technologies and commitments to patient-centricity."

The report was released less than two weeks after a PwC study projected that the medical cost trend will be 6.5% in 2022.

Related: Medical Cost Trend Could Hit 10% in 2021

While PwC highlighted vulnerabilities in the long-term care deal volume, the broader health services sector is expected to continue pursuing transactions going forward thanks to activity in the physician groups and behavioral health subsectors.

"Looking ahead, we anticipate ongoing interest in the public markets, given recent activity. For years, there were no pure health services IPOs, but 2021 has already seen four," the report stated.

Related: Surprise Billing, Digital Experiences Among Top Healthcare Trends

PwC also released a report analyzing the pharmaceuticals and life sciences sector, which has seen deal activity return to "normal" levels after a volatile 2020.

In the first half of 2021, the value of deals in this sector increased 410% compared to the first half of 2020, while deal volumes increased 101% year-over-year.

PwC added that many deals in 2021 have centered around efforts to shore up supply chains after the COVID-19 pandemic exposed industry-wide weaknesses.

While there have been some limitations on deal activity through the first half of 2021, such as regulatory uncertainty, PwC stated that M&A will continue to be used to "innovate and maximize" the potential of participant portfolios.

"In the second half of the year, we expect M&A activity to continue to be a focus for the sector. Large pharmaceutical companies have strong balance sheets and capital continues to be readily available," the report stated. "Biotech funding continues to trend well, pushing valuation up. Special purpose acquisition companies (SPACs) have continued to move towards the mainstream as a viable alternative to traditional M&A and IPOs continue to be a hotspot for investors and companies looking for the capital needed to fuel growth."

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.


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