Health Care Deal Volume Rises in Q1:2017, As Deal Value Strengthens, According to HealthCareMandA.com

FOR IMMEDIATE RELEASELisa Phillips
Editor
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NORWALK, CT – April 14, 2017 – Health care merger and acquisition activity picked up in the first quarter of 2017. Compared with the fourth quarter of 2016, deal volume increased 7%, to 395 transactions. Deal volume was also up 6% compared with the same quarter the year before. Combined spending in the first quarter reached $58.7 billion, an increase of 56% compared with the $37.8 billion spent in the previous quarter, according to HealthCareMandA.com. First quarter deal value was down 27% compared with $80.9 billion spent in Q1:16. 

Health Care M&A Market – Deal Volume by Sector

Q1:17Q4:16Q1:16
SectorDealsDealsChangeDealsChange
Services  
Behavioral Health Care12850%933%
Home Health & Hospice13128%21-38%
Hospitals1923-17%27-30%
Laboratories, MRI & Dialysis10911%825%
Long-Term Care7393-22%84-13%
Managed Care440%8-50%
Physician Medical Groups482778%23109%
Rehabilitation990%12-25%
Other47447%4115%
   Services subtotal2352293%2331%
    
Technology
Biotechnology625611%3294%
eHealth473057%3824%
Medical Devices22220%31-29%
Pharmaceuticals2933-12%40-28%
   Technology subtotal16014113%14113%
Grand Total3953707%3746%

Source: HealthCareMandA.com, April 2017

Health care services represented 59% of the first quarter’s transaction total, lower than the 62% share reported in the previous quarter, and the year-ago quarter. The decline is due to slow-downs in M&A activity in two of the services sectors, Hospitals (17%) and Long-Term Care (-22%), versus the previous quarter. The Behavioral Health Care (+50%) and Physician Medical Group (+78%) sectors, however, posted higher deal-making activity compared with the fourth quarter of 2016. Both the Behavioral Health and Physician Medical Group sectors have experienced tailwinds from the 21st Century Cures Act and the Medicare Access and CHIP Reauthorization Act, respectively.

On the technology side, transaction growth was strong in the Biotechnology (+11%) and eHealth (+57%) sectors, compared with the previous quarter. M&A in both sectors posted strong gains over the year-ago quarter, at 94% and 24%, respectively. Biotechnology, in particular, has benefited from the push to find new cures for long-standing diseases.

“The first quarter was dominated by Congress’s repeal and replacement attempt of the Affordable Care Act, which produced winners and losers among the healthcare sectors,” said Lisa E. Phillips, editor of HealthCareMandA.com. “The uncertainty created headwinds in the Hospital and Managed Care sectors. The eHealth sector was unaffected, because technology is at the heart of all aspects of health care today.”

The failure to replace the ACA just continues the uncertainty faced by various healthcare sectors. The House of Representatives may revisit the legislative effort in the second or third quarter this year. “Investors generally don’t like uncertainty,” Ms. Phillips said. “But many have become used to it, and are willing to invest in sectors that have been boosted by other legislation, such as the 21st Century Cures Act.”

For more information on the HealthCareMandA.com investment research source, or for a membership to any of Irving Levin Associates’ services, please call 800-248-1668. Irving Levin Associates, Inc. was established in 1948 and is headquartered in Norwalk, Connecticut. This privately held corporation publishes annual and quarterly research reports, monthly and weekly newsletters, and maintains merger and acquisition databases on the health care and senior housing markets. If you would like to receive future releases, please email pressreleases@levinassociates.com.

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