NEW CANAAN, CT – July 23, 2020 – Health care merger and acquisition activity fell 19% in the second quarter of 2020, to 327 transactions, compared with the previous quarter’s 404 announced deals. M&A in the second quarter of 2020 was 33% lower than the same quarter in 2019. Combined spending in the second quarter totaled nearly $12.8 billion, based on disclosed prices, down 63% compared with the previous quarter’s $34.6 billion. Spending in the second quarter was 91% lower than the $138.9 billion reported in the same quarter in 2019, according to HealthCareMandA.com.
The effects of the COVID-19 pandemic on healthcare M&A can be seen in the quarter-over-quarter and year-over-year decline for most of the services sectors. Healthcare services transactions made up 61% of the second quarter’s deal volume, lower than the previous quarters. The Behavioral Health Care, Home Health & Hospice, Long-Term Care and Physician Medical Groups sectors all showed double-digit declines in M&A activity compared with the first quarter of 2020 and the second quarter of 2019. However, Hospital M&A increased by 11% compared with the first quarter of 2019. Combined spending on the services side accounted for 44% of the quarter’s total, approximately $5.7 billion, based on disclosed prices.
Healthcare technology deals accounted for 39% of the second quarter’s deal volume, with 127 transactions. The Biotechnology sector posted a significant year-over-year increase, up 18%, with 39 deals. The race for a COVID-19 vaccine was the focus of several transactions in the second quarter of 2020, giving the sector a boost in activity. Combined spending for all the technology sectors was $7.1 billion.
“As expected, deal volume in the second quarter was adversely impacted by the coronavirus epidemic,” said Lisa E. Phillips, editor of HealthCareMandA.com. “Every healthcare services sector felt it. For hospital M&A, there was a gain in deals as some small rural hospitals closed due to the financial strains of closing down elective surgeries and dealing with critically ill COVID-19 patients.
“Some analysts were hoping for a rebound in deal activity in Q3 and we are seeing that in some areas,” Phillips added. “But with the virus surging in some of the largest states, it will likely be another soft quarter for healthcare deals.”
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