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Healthcare deal volume may be down but megadeals, value up in 2Q

July 29, 2017
  • PwC’s Deals Insights for the second quarter found there were more than 200 deals involving the U.S. health services industry, which is the 11th quarter in a row with that level of activity. The deal volume was 15% lower than the second quarter of last year, but the deals’ total value this year were much more.
  • The number of deals in healthcare decreased by 18% compared to the first quarter of 2017, but megadeals announced in the second quarter pushed the deal values significantly higher to $49.6 billion. The second quarter had the largest valued deals since the third quarter of 2015.
  • PwC said there were 10 megadeals in the second quarter valued at a total of $43.3 billion. In comparison, there has been an average of four megadeals per quarter since 2015.

The average megadeal in Q2 was around $4 billion. Six of the megadeals were in the “Other Services” sub-sector, including Hellman & Friedman and The Carlyle Group’s recapitalization of Pharmaceutical Product Development, LLC, which was the biggest deal of the quarter at $9.1 billion.

Long-term care saw the most deals (75), with the most growth in the areas of “labs, MRI & dialysis;” hospitals and “other services.” Out of all the sub-sectors in healthcare, hospitals were the only one to see positive growth on both a quarterly and yearly basis.

Though no one knows what kind of healthcare plan may come out of Capitol Hill, healthcare organizations remain focused on reaching scale to remain competitive, cut costs and improve efficiencies.

PwC’s report differed slightly from a recent analysis by Kaufman, Hall & Associates, LLC, which found that hospital and health system mergers and acquisitions increased 15% in the second quarter compared to last year. The two reports both noted the increase in large transactions. Kaufman, Hall & Associates said there were six transactions of health services with nearly $1 billion or more in revenues announcing during the first half of 2017. There were only four in all of last year.

One of the biggest hospital deals in the second quarter was a $2 billion merger of Steward Health Care with IASIS Healthcare, which would make the former system the largest private for-profit hospital operator with 36 hospitals in 10 states. Major healthcare deals have continued in the third quarter, including the Beth Israel Deaconess Memorial Center-Lahey Health merger announced this month. The merger deal would create the second largest health system in Massachusetts.

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