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Healthcare mergers keep breaking records but the value of deals has dropped off

From the second quarter of 2018 to the third, deal value dipped to $15.9 billion, the lowest since the first quarter of 2017.

Jeff Lagasse, Associate Editor

Healthcare mergers and acquisitions are a pretty frequent occurrence this year, even posting a record-breaking first quarter, but while the volume remains high, the value of the deals has declined as the year has progressed, according to a new analysis from PriceWaterhouseCoopers.

From the second quarter of 2018 to the third, deal value dipped to $15.9 billion, a 35.8 percent decrease. That's the lowest value since the first quarter of 2017.

IMPACT

Though the volume of deals did slip slightly from the second quarter to the third -- with 261 deals in the third quarter, that's almost an 11 percent dip -- volume was still up about 0.4 percent from the same quarter in 2017.

The biggest transaction of the third quarter was RCCH Healthcare Partners' $5.6 billion acquisition of LifePoint Health, a so-called "megadeal" that represented 34 percent of the quarter's total deal value. A megadeal is simply a deal worth a large sum of money.

One mega deal that hasn't yet been finalized is CVS Health's pending merger with Aetna, worth $69 billion. If that deal closes as expected, it could raise average deal value once again, the analysis said.

WHAT ELSE YOU SHOULD KNOW

Thanks largely to the RCCH-Lifepoint deal, hospitals represented the healthcare subsector with the most value -- 51 percent of the total in the quarter.

THE TREND

Volume has been steady for a while now. In fact, the number of deals has exceeded 200 per quarter since the fourth quarter of 2014, and has exceeded 250 deals for five straight quarters.

As a subsector, long-term care saw the highest volume of deals -- 102 in the quarter -- but the sector finished third in terms of value.

A big part of the reason mergers and acquisitions in healthcare have been accumulating at a mighty clip over the past several years is scale. Consolidation helps healthcare organizations increase the scale of their business and retain, or even increase, their market share.
 

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com

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