2H 2021 Healthcare M&A Report

Healthcare deals surged in 2021, up over 50% through November over the prior year with heavy action in physician medical groups, managed care, and rehabilitation subsectors. And never mind high multiples. Despite average multiples of value to EBITDA eclipsing 15x, the buying spree continued, including nine megadeals at over $5 billion. Special Purpose Acquisition Companies, the so-called blank-check investment companies known as SPACs, continued to be active, as we saw 40 healthcare and life science SPAC IPOs in the first quarter of 2021 alone, with activity stoked by plenty of available capital. The current administration’s focus on regulatory issues – especially in the healthcare sector – may begin to shape activity. If hospitals can’t acquire other systems the horizontal mergers in a more tightly regulated environment, they can – to a degree – turn to vertical acquisitions. In any case, there may be little room for extensive horizontal moves, as hospital systems in metropolitan markets are heavily concentrated, a trend on the rise since 2012. But now we’re seeing an increasing concentration of physicians under larger health system umbrellas. Digital health systems appear to become increasingly popular as healthcare systems look for profitable ways to keep up with interest from Amazon, Microsoft, and Walgreens in everything from telehealth to chatbot technologies…

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