H2C Industry Insights • 2Q20
Healthcare M&A Transactions Database
While hospital and health system M&A remained steady, sales of distressed hospitals rose.
"Despite the pandemic, Q2 2020 activity did not come to a complete halt, and some sectors remained relatively steady. Transactions that were in the pipeline continued to move forward, but there was a pause in new business as operators and investors focused on managing the companies during COVID-19. This may cause a slowdown in the number of transactions set to close in the second half of the year."
- Nick Beale
Q2 Healthcare M&A Activity Dips,
but Select Sectors Remain Resilient
posted on July 10, 2020
Data from Hammond Hanlon Camp LLC’s (“H2C”) mergers and acquisitions (“M&A”) database shows 120 transactions were announced in Q2 2020, a 25 percent decline over Q1 figures. This increased the year-to-date total to 281, which represents a 14 percent decrease versus year-to-date 2019, when 328 transactions were announced. Much of the decline can be attributed to the post-acute sector, which experienced an active first half of 2019. Some interesting trends emerged in other sectors as well.
Note: Historical figures are adjusted based on newly available information.
Transaction volume in healthcare IT (“HCIT”) has risen significantly in 2020, with a year-to-date total of 90 transactions, up from 66 year over year. Much of this increase was reflected in Q1, as Q2 totals in 2020 and 2019 were similar, at 35 and 34 HCIT transactions, respectively. Meanwhile, hospital and health system transactions remained steady, with 19 transactions announced, compared with 20 in Q2 2019. The year-to-date volume of 39 transactions is comparable to the 44 transactions announced year-to-date in 2019.
Across all other sectors, volume fell. The post-acute sector, which saw a dramatic slowdown in February and March following a strong start to 2020, experienced a year-over-year decline in volume of 34 percent, with only 45 transactions announced. Specifically, only nine home health transactions were announced in Q2 2020 versus 21 in Q2 2019. The behavioral health sector, meanwhile, recorded 15 transactions, down nearly 44 percent from Q2 2019, an unusually active quarter, when 27 transactions were announced. This compares to an average of 18 transactions over the past six quarters. Managed care and laboratory transaction volume also fell, recording three transactions each in Q2. This represents a 73 and 57 percent decrease, respectively, versus Q2 2019.
Distressed sales of hospitals and health systems picked up in Q2, with sellers cutting deals to ensure patients have access to care during the pandemic and avoid closures. Notable distressed sales include Seton Medical Center (Calif.); Seton Coastside Medical Center (Calif.), Williamson Memorial Hospital (W.V.), St. Francis Medical Center (Calif.), Galesburg Cottage Hospital (Ill.), Easton Hospital (Pa.), and St. Vincent's Medical Center (Ky.).
It is important to note that some announced transactions do not go on to close due to unforeseen risks, regulations, or other factors. In a COVID-19 environment, the number of announced transactions that do not ultimately close could be higher than usual because of the economic impact of the pandemic on healthcare organizations.
“Despite the pandemic, Q2 2020 activity did not come to a complete halt, and some sectors remained relatively steady. Transactions that were in the pipeline continued to move forward, but there was a pause in new business as operators and investors focused on managing the companies during COVID-19. This may cause a slowdown in the number of transactions set to close in the second half of the year,” said Nick Beale, Director, H2C. “Over the past month, there has been a refocus by investors from the operations of their companies to identifying and making new investments. Some stronger health systems also are beginning to look at strategic opportunities for growth. We encourage our clients to continue thinking strategically and to be proactive in their approach for the remainder of the 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
Hammond Hanlon Camp LLC (“H2C”) is an independent 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 & acquisitions, capital markets, real estate, and restructuring transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value. Hammond Hanlon Camp LLC offers securities through its wholly-owned subsidiary H2C Securities Inc., member FINRA/SIPC. For more information, go to h2c.com.
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