2H 2023 Healthcare M&A Report

In hindsight, 2023 was a challenging year in the Healthcare sector. In fact, it’s been a challenging environment for the past few years. In 2023, the sector’s percentage of global private equity activity fell below 11%, its lowest rate since 2015. Venture capital interest, especially in biopharma, was down dramatically. Across the sector, things look a little cloudy, with lower multiples in the deals that were completed. Many healthcare companies are finding themselves too highly leveraged, the spike in interest rates hurt, and there are reports that many companies will have no other option but seek help or default in ...

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Big picture” stuff – macroeconomic factors – hamstrung dealmaking across the healthcare sector. The global business environment for more than a decade has feasted on “free money” in the form of ultra-low interest rates. But in the past couple of years, central banks reacted with interest rate hikes, as the world struggled with supply chain woes and inflation. A lot of interest rate hikes. Wait, borrowing isn’t free? And at hospitals, profitable elective surgeries have been backlogged in the wake of COVID-19 pressures. A shortage of available trained medical personnel meant higher wages. In a flash, profitable health centers reported losing money. Rural and smaller hospitals especially began to suffer. Mergers and acquisitions slowed.

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Perhaps more so than in any industry, skilled talent in healthcare matters. It’s not easy to find, it’s not cheap, and it takes a long time to develop. But availability of personnel wasn’t the only factor challenging the industry. Like everyone else, investors and buyers in healthcare were watching inflation and geopolitical factors, such as supply chain snarls and, oh, warfare. Mergers and Acquisitions stumbled from their lofty perch of 2021, down nearly 50% early in the year. Investors are careful. Deals were done, but with purpose and caution. We remain optimistic, of course, because people need healthcare. When they are sick, they need help. When they are healthy, they want to stay healthy. The questions will be how do organizations provide care, optimize profit, control costs, and scale.

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Healthcare Report 2H 2022

Take a deep breath and let us reset for a moment. That seems to sum up 1H22 in Healthcare M&A. Unless you’re old enough to remember the 1918 Spanish influenza epidemic, none of us have seen the Healthcare Industry in a period quite like the past two years. As we emerge, vaccines in hand, it was maybe inevitable dealmakers would take a step back and breathe, and that’s what we saw, a very slow, cautious reset.

Only 12 big hospital M&A deals were cemented in the first three months in the industry. That seems hard to believe. Everyone went back to their corner and took a stool. Then, even if deal numbers remained depressed, the heavyweights were back at it in Q2.

None of this should be a surprise, a lot of energy was expended last year as 2021 offered catalysts for acceleration. There was talk of a change to capital gains taxation from the new Biden administration. It didn’t happen, but nothing accelerates deals faster than the threat of higher taxation and a potential deadline. In addition, the Biden administration has been pushing federal regulators to scrutinize mergers and acquisitions in the industry more closely, providing additional pressure. So there was pressure to get things done before 2022, leaving less unfinished business heading into this year…

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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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The Healthcare industry sustained a shock to the system in 2020 as COVID-19 struck a direct and dramatic blow to the bottom line. The hospital sector saw outpatient revenues fall due to the pandemic and operating margins were down nearly 5% over the year, without accounting for federal assistance. Throughout the year, private equity remained active in the space, and we expect that to accelerate, however with interest rates so low and weaker players looking for a lifeline, we anticipate some bigger deals will continue to be made in 2H21. The number of deals in 2020 was down slightly, but with the added strain and costs of coping with COVID, we anticipate smaller systems and independent facilities will be looking for partnerships with larger buyers in 2021.

Analysts report capital has been pouring into markets across multiple sectors this year with venture-backed companies attracting some $150 billion in just 1H21 – about 90% of the capital inflow in all of 2020 – with private equity and hedge funds playing a major role.

Today, health systems shaken by a decline in patient visits and additional costs are on the mend. And we believe many of the newly learned practices seen over the pandemic, including a focus on personal care, telehealth services, and remote monitoring, are likely to continue, creating opportunities in health tech as consumers and providers seek convenience, efficiency, and savings…

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The healthcare industry took a huge, unexpected, blow from 2020’s COVID-19 pandemic, a blow we believe may dramatically change the healthcare model and spur M&A activity as organizations race to increase margins, achieve efficiencies, fill gaps in patient expectations and overhaul how and where care is provided.

In the United States, the industry suffered lost revenues estimated at $202.6 billion (an average of $50.7 billion per month). As they readied for a surge in hospitalized patients with COVID-19, hospitals faced unprecedented new expenses as revenue from higher-margin, elective procedures and services plummeted. Hospitals had to convert space to deal with the special needs of virus patients, add workers, pay overtime, provide new staff training, even obtain the basics such as personal protective equipment (PPE). Elective surgeries were canceled – either by the hospitals to free space, or by patients out of fear of contracting COVID. Healthcare providers across the country suffered.

Damage was equally spread throughout the space, not only independent hospital systems, but across academic medical centers, federal Veterans Affairs facilities and nursing and long-term care facilities. And physicians in private practices across the country reported struggling, some turning to GoFundMe drives to stay afloat, reporting up to 80% drops in patient visits…

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If there’s a sector impacted by a global viral pandemic, it’s Healthcare. While patient care, research, workplace safety, and supply logistics took center stage in 1H20, it was understandable that M&A activity in the sector was disrupted during what may be one of the most unusual and unanticipated periods in a generation. Healthcare, an industry generally considered immune to economic disruptions, took this one hard. As the virus dug in its heels and valuation uncertainty became apparent, M&A activity fell in 1H20 year-over year. But looking forward, we see a sector where consolidation, fueled by the pandemic’s effects, will only accelerate. Those in the best position to act are those who have remained engaged, attuned, and ready.

The COVID-19 pandemic is exposing inherent weaknesses in the Healthcare system. Hospital systems that papered over fissures in the past are being exposed to cash flow strains, debt loads, staffing issues, and patient concerns over safety. Lucrative elective procedures and routine care visits are being postponed while pandemic protection measures are increasing costs and demand for less profitable services. Envision Healthcare Group, operating in 45 states and held by private equity firm KKR, in April found itself wrestling with $7 billion in debt and hired restructuring advisors. The company reportedly took drastic action, slashing senior staff pay 50% and suspending retirement contributions and raises amid decreases in patient volumes as high as 70% for ambulatory surgeries and anesthesia services…

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In the world of mergers and acquisitions, healthcare stands among the titans. In hospital systems, mega pharmaceuticals, and medical device manufacturers, the price of entry is stratospheric, and operations are complex and intertwined. But the rewards are massive. In 2018, American healthcare spending was up 4.6% to $3.6 trillion. At more than $11,000 per person, health spending accounts for nearly 18% of the country’s gross domestic product (GDP).

It’s little wonder the general and specialty provider sectors are leaders in the M&A space. With transactions often measured in billions, these deals involve multiple investment banks, potentially thousands of people hammering out the deals, and often publicly traded companies.


Healthcare is an undisputedly mature market which has grown well beyond the mom and pop, small town scope. Hospitals are large operations, the price of a single piece of equipment such as an MRI scanner can surpass $2 million, and the complexities of scheduling, billing, insurance, and physician and employee management are daunting…

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Major players in the Healthcare Industry led the way in the flurry of M&A activity during the first half of 2019, which culminated in a total of 371 transactions tracked by SDR Ventures in the sector. Many prominent corporations have successfully executed or announced major acquisitions thus far in 2019, including multi-billion-dollar deals by Centene, Danaher, 3M and Ethicon. The combined enterprise value of these companies’ 2019 targets alone totals to nearly $50 billion, which reflects an increase in the implementation of large-scale inorganic growth strategies by the largest Healthcare Companies in the United States. Furthermore, The KPC Group made quite a splash with its $610 million acquisition of the Verity Health System of California, Inc., which is comprised of four notable subsidiaries: Orange County, Anaheim, Chapman, and South Coast Global Medical Centers.

That being said, there was no shortage of active financial buyers in the Healthcare sector in the first six months of 2019. Both New MainStream Capital and Gryphon Investors, Inc. completed five investments each during this period. It is important to note that the majority of these financial firms’ targets shared a key attribute – they are categorized as Specialty Providers. These companies operate in a variety of specialty fields, including but not limited to podiatry, ophthalmology, and dermatology.


No one individual group made more acquisitions in the Healthcare Industry in the first half of 2019 than The Ensign Group (NASDAQ:ENSG), which has already completed 10 transactions this year. Ensign is the parent company of a group of subsidiaries that consists of skilled nursing, rehabilitative care services, home health care, hospice care and assisted living companies. The company’s 2019 acquisition portfolio is predominately comprised of Long Term & Behavioral Care targets, with the exception of Bruno Dialysis – a Specialty Provider. Ensign’s deals in the first half of 2019 demonstrate the group’s willingness to employ an inorganic growth strategy in order to bolster its presence within its primary segment.

The 2019 acquisition spree for Ensign appears to be less focused on service diversification and more targeted towards geographic expansion. With 9 of the 10 deals completed by the group this year being in the Long Term & Behavioral Care segment, the targets that are being pursued by Ensign all provide skilled nursing, assisted living, and rehabilitation services. The geographic footprint of this acquisition campaign spans the western side of the country, with 4 deals closed in Arizona (Olive Ridge Senior Living, Vista Post Acute & Rehabilitation, Groves Assisted Living Community, and Phoenix Mountain Nursing Center), 4 deals closed in California (Portside Healthcare, Genesis Healthcare, Bruno Dialysis, and Downey Care Center), and a single acquisition in Nevada (Goldfield Mountain Healthcare and Utah (Bella Terra Cedar City) respectively.

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