Transactions in this year's first quarter are continuing on trend, but there's been a decline in "mega mergers."
There were 12 announced M&A transactions during the first quarter of 2022, according to a recent Kaufman Hall report.
This is on trend with fewer M&A transactions happening each quarter during the pandemic, but this is also a departure from the high percentage of "mega" transactions seen during the pandemic, according to the M&A Quarterly Activity Report: Q1 2022.
"The pandemic has affirmed the imperatives of scale and we expect that this quarter's results will prove to be an anomaly as we (hopefully) move beyond the COVID-related distractions that health systems have faced over the past two years," the report authors write.
M&A activity in Q1 of this year is similar to Q1 of 2021, which had 13 announced transactions. This is much smaller in comparison to 2016 through 2020, where there were between 25 and 30 announced transactions in the first quarter.
Additionally, the report found:
- Seven (58%) of the transactions had for-profit sellers, which is an all-time high, according to Kaufman Hall.
- Only one transaction during the quarter had a for-profit acquirer.
- The remaining 11 acquirers were nonprofit health systems (two of them being academic or university affiliated, and three of them being religiously affiliated).
California-based Prospect Medical Holdings is selling seven hospitals, exiting two out of the three states it currently has hospitals in. In one transaction, Prospect is selling four hospitals from Pennsylvania-based Crozer Health to ChristianaCare. Additionally, it is selling Connecticut-based Waterbury Health and Eastern Connecticut Health Network, three hospitals total, to Yale New Haven Health. Both transactions will return the seven hospitals back to nonprofit status following the close of the transactions.
Additionally, LifePoint Health, Community Health System, and Pipeline Health also announced transactions in Q1.
There were no "mega" M&A transactions announced this quarter, and in fact, the report found that transactions this quarter were all smaller than other quarterly transactions we've seen during the pandemic.
The report found that:
- In four of the transactions, the smaller party's revenue, on average, were below $100 million.
- Six of the involved parties have revenues between $100 million and$500 million.
- Two had revenues between $500 million and $1 billion.
- The average seller size was $246 million in Q1 2022, a significant decrease from the historic high of mega transactions in 2021 which was $619 million for the first quarter.
Melanie Blackman is a contributing editor for strategy, marketing, and human resources at HealthLeaders, an HCPro brand.