PWC Summary of 2014 Health Services M & A Activity

The mergers and acquisition market has been strong across the economy for the last couple of years, and that strength is certainly reflected in health care.  A PWC report summarizes deal activity in one segment of health care, the provision of services, which includes hospitals, outpatient providers, long-term care, managed care and similar service groups.   (PWC Report)  In 2014 the number of deals in the health care services increased by 16.3% over 2013 and the value of transactions was $61 billion, up 18.4% compared to 2013 (note that value relates only to deals where the value was publicly revealed, there are many private transactions as well).  The long-term care and behavioral health areas showed particular strength.  And managed care was quite active, with a 50% increase in deal volume and a 1500% rise in deal value.  Private equity firms were involved in 62 transactions, just a slight rise from 58 in 2013.

Looking more closely at specific segments, among hospitals there were 79 transactions with a value of $2.2 billion.  There were few large transactions.  The managed care sector had 22 and because so many of the transactions involved private companies, it is hard to estimate a value.  Post-acute care was very strong, with 288 long-term care deals, 65 home health and hospice transactions and 19 rehabilitation provider deals, with announced values of around $33 billion.  There were several large transactions in this sector and health care REITs were involved in a number of those.  Physician practices saw fewer acquisitions than in 2013, but values were up due to some large transactions, primarily in the practice management or specialty areas.  Some miscellaneous subsegments with good activity included drug distribution, pharmacy benefit management and labs.

The early returns on 2015 seem to point to a similarly strong M & A market for health care services, but with a potential interest rate rise and a toppy stock market, macro factors could change that outlook.