H2C Industry Insights • 3Q20
Healthcare M&A Transactions Database
About Hammond Hanlon Camp LLC ("H2C")
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. H2C offers securities through its wholly owned subsidiary H2C Securities Inc., member FINRA/SIPC. For more information, go to h2c.com.
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posted on Oct. 15, 2020
Data from the Hammond Hanlon Camp LLC (“H2C”) mergers and acquisitions (“M&A”) database shows 173 transactions were announced in Q3 2020, a 9 percent increase over Q3 2019 figures. This increased the year-to-date total to 454, which represents a 7 percent decrease versus year-to-date 2019, when 486 transactions were announced. Much of the year-to-date decline can be attributed to a slower Q2 2020, which saw a 28 percent decrease in volume year-over-year amid the start of the coronavirus pandemic.
Q3 Healthcare M&A Recovers but Still Trails 2019
"Despite the pandemic, transaction volume has increased following a slower Q2 2020. As the healthcare services industry adjusts to the new normal, operators and investors are refocusing on strategic initiatives and beginning to analyze opportunities."
– Nicholas R. Beale
It is important to note that some announced transactions do not go on to close due to unforeseen risks, regulations, or other factors. For example, the highly publicized Advocate Aurora–Beaumont merger that was announced in Q2 has just been called off due to concerns raised by physicians, donors, and state regulatory authorities. COVID-19 also could contribute to a higher-than-usual number of announced transactions that do not ultimately close, given the economic impact of the pandemic on healthcare organizations.
“Despite the pandemic, transaction volume has increased following a slower Q2 2020,” said Nicholas R. (“Nick”) Beale, Director, H2C. “As the healthcare services industry adjusts to the new normal, operators and investors are refocusing on strategic initiatives and beginning to analyze opportunities. Asset prices remain elevated, which has proven beneficial to sellers divesting non-core assets or owners looking for exit opportunities. We expect Q4 2020 to remain active as teams try to close transactions before the holiday season and prepare to launch new deals in 2021. 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.
Transaction volume in healthcare IT (“HCIT”) has risen significantly in 2020, with a year-to-date total of 146 transactions, up from 101 year-over-year. Much of this increase was reflected in Q1 and Q3, as Q2 volumes in 2020 and 2019 were similar. The post-acute sector, which saw a dramatic slowdown in February and March following a strong start to 2020, experienced an active third quarter, with 76 announced transactions, representing a year-over-year increase in volume of 15 percent. Despite this, year-to-date volume is still down 14 percent versus 2019.
Across all other sectors, volume fell. Hospital and health system transactions continue to trail 2019 figures, with 18 transactions announced, compared with 22 in Q3 2019. The year-to-date volume of 57 transactions is behind the 66 transactions announced year-to-date in 2019. Despite the slowdown in hospital-related M&A activity in 2020, many of our health system clients have indicated that they are refocusing their attention on strategic growth and expect to see an uptick in activity over the next 12 months.
Notable hospital and health system transactions in Q3 2020 include WVU Health System’s acquisition of Wheeling Hospital, which would become the system’s 13th hospital and 7th acquisition since August 2018. Another notable hospital transaction announced in Q3 was the merger of Sentara Healthcare and Cone Health. When completed, the combined system will include 17-hospitals with more than 2,400 physicians and advanced practice clinicians.
Meanwhile, the behavioral health sector recorded 13 transactions, down 38 percent from Q3 2019, when 21 transactions were announced. This compares to an average of 18 transactions over the past six quarters.
Managed care and laboratory transaction volume also fell. In the managed care space, the year-to-date volume of eight transactions is down 63 percent compared with 2019, when 22 transactions were announced. In the laboratory space, year-to-date volume of 16 transactions is down 24 percent versus 2019, when 21 transactions were announced.
In the post-acute sector, Providence Service Corporation (Nasdaq: PRSC) entered into a definitive agreement to acquire Simplura Health Group (“Simplura”), which operates a large network of home health and personal care agencies across seven states, from One Equity Partners (“OEP”) in an all-cash transaction at an enterprise value of $575 million.