INDUSTRY INSIGHTS

H2C Industry Insights • 2020 in Review

Healthcare M&A Transactions Database

2020 Healthcare M&A Activity Recovers, Edging Past 2019
posted on Jan. 19, 2021
Despite pandemic headwinds, there was continued strong drive in Q4 2020 to execute strategic healthcare mergers and acquisitions (“M&A”) at elevated valuations. Data from the Hammond Hanlon Camp LLC ("H2C") M&A database shows 177 transactions announced in Q4 2020, a 21 percent increase over Q4 2019. Q4 raised the 2020 healthcare M&A transaction total to 642, a 2 percent increase over 2019 (632 transactions). Following a slow Q2, the second half of 2020 saw significant volume, especially across the healthcare IT ("HCIT") and post-acute sectors.
Announced Healthcare M&A Transactions in 2020
Slightly Surpass 2019 Totals
4Q20 M&A Transactions - Figure 1.png
Note: Historical figures are adjusted based on newly available information.

 

"Q4 was another strong quarter where we saw healthcare stakeholders refocus and reengage on strategic initiatives."

           

                  – Michael J. Tierney
                     Director, H2C 

Transaction volume in HCIT rose significantly in 2020, with a total of 192 transactions, up from 133 in 2019. Each quarter exceeded prior-year volumes, although the largest increases were Q1 and Q3. 2020 was also a year in which HCIT companies raised a record $15.3 billion in investments. One of the most notable transactions was Teladoc Health’s (NYSE: TDOC) $18.5 billion acquisition of Livongo, finalized in October 2020. Stakeholders hope combining two of the largest publicly traded virtual care companies will help capitalize on increasing digital health demand.

The post-acute sector—which started strong in 2020, yet saw a slowdown in February and March due to the pandemic—experienced an active fourth quarter, with 79 announced transactions, representing a year-over-year increase in volume of 22 percent. Despite this, 2020 post-acute volume is still down 6 percent versus 2019. Among the most notable post-acute transactions, Providence Service Corporation (Nasdaq: PRSC) entered into a definitive agreement to acquire Simplura Health Group, which operates an extensive network of home health and personal care agencies across seven states, from One Equity Partners in an all-cash transaction at an enterprise value of $575 million.

Across all other sectors, Q4 volume was unable to reach 2019 volumes. Hospital and health system Q4 transactions were flat compared to 2019 figures, with 22 transactions announced. Total 2020 volume of 83 transactions lags the 88 transactions announced in 2019.

Two of the most notable planned hospital transactions of 2020 were withdrawn. In December 2020, Sanford Health and Intermountain Healthcare discontinued negotiations following a change of leadership. Additionally, the highly publicized Advocate Aurora–Beaumont merger announced in Q2 was called off in October 2020 after intense public pressure.

Notable hospital transactions in 2020 include WVU Health System's affiliation with Princeton Community Hospital and acquisition of Wheeling Hospital, which would become the system's 13th hospital. WVU Health has announced eight transactions since August 2018. Sentara Healthcare and Cone Health also announced their intent to merge in August 2020. The combined system will create a 17-hospital system with more than 2,400 physicians and advanced practice clinicians.

Meanwhile, the behavioral health sector recorded 65 transactions, down 19 percent from 2019 (80 transactions). Managed care and laboratory transaction volume also fell. In the managed care space, the 2020 volume of 15 transactions is down 38 percent compared with 2019, when 24 transactions were announced. In the laboratory space, 2020 volume of 26 transactions is down 13 percent versus 2019, when 30 transactions were reported.

It is important to note that some announced transactions do not go on to close due to unforeseen risks, regulations, or other factors, as seen with Sanford Health–Intermountain and Advocate Aurora–Beaumont. In a COVID-19 environment, the number of announced transactions that do not ultimately close could be higher than usual because of the pandemic's economic impact on healthcare organizations.

"Despite the pandemic, 2020 healthcare transaction volume surprised many, with a significant number of announced transactions in the second half of the calendar year. As the healthcare industry adjusts to the new normal, operators and investors are refocusing strategic initiatives and analyzing opportunities. Asset prices remain elevated, which has proven beneficial to sellers divesting non-core assets or owners looking for exit opportunities," said Michael J. Tierney, Director, H2C. "We expect 2021 to remain active as service providers encounter new challenges and opportunities. We encourage our clients to continue thinking strategically in the new year."

If your organization is considering evaluating options and opportunities for merger, acquisition, divestiture, or partnership, H2C is uniquely positioned to offer expert advice.
Let us put our market knowledge and expertise to work for you. Contact an H2C professional directly.

For more information, access H2C’s M&A database.

About Hammond Hanlon Camp LLC ("H2C")

 

H2C is a strategic advisory and investment banking firm committed to providing superior advice as a trusted advisor to healthcare organizations and related companies throughout the United States. H2C’s professionals have a long track record of success in healthcare mergers and acquisitions, capital markets, real estate, and restructuring transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value. 

Securities offered through H2C Securities Inc., member FINRA/SIPC a registered broker-dealer and a wholly owned subsidiary of ©Hammond Hanlon Camp LLC. All rights reserved. Hammond Hanlon Camp LLC is a wholly owned subsidiary of Fifth Third Acquisition Holdings, LLC and an indirect subsidiary of Fifth Third Bank, National Association. Securities and services offered through H2C Securities Inc.: Are Not FDIC Insured; Offer No Bank Guarantee; May Lose Value; Are Not Insured by any Federal Government Agency; Are Not a Deposit.

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