Megadeals lift healthcare M&A revenues to record in Q2

Dive Brief:

  • Healthcare mergers reached a record-high $19.2 billion in total transacted revenue in the second quarter of this year, led by the planned tie-up of Advocate Aurora Health and Atrium Health and several other large deals, according to the latest quarterly M&A report from Kaufman Hall.
  • Still, the number of healthcare transactions announced during the second quarter remained below pre-pandemic levels at just 13 deals, one more than the record-low total seen in the first quarter of this year. Activity so far in 2022 underscores what could be a longer-term shift toward fewer but larger hospital deals, the industry consultants said.
  • Kaufman Hall also predicted continued interest in partnerships between health systems and skilled nursing facilities that can offer new services or more specialized care. Such facilities can support patients’ earlier discharge from inpatient care to a lower-cost setting and can help reduce hospital re-admissions, the report said.

Dive Insight:

Dealmaking in the first half of the year continues a sluggish pace established in 2021, when just 49 health system mergers were announced all year. Last year’s tally marked the lowest annual deal total in a decade, according to Kaufman Hall.

But deals are getting larger. The second quarter’s $19.2 billion in transacted revenue is more than double the total of $8.5 billion seen in the second quarter of 2021, when a similar number of transactions was announced.

Megamergers, in which the seller’s annual revenue tops $1 billion, remain an ongoing trend. Kaufman Hall tracked two such deals in the second quarter: the Advocate-Atrium transaction and Trinity Health’s planned acquisition of Iowa-based MercyOne.

The second quarter saw two additional transactions with smaller-party revenue above $500 million: Bellin Health System’s merger with Gundersen Health System and George Washington University Hospital’s combination with Universal Health Services.

All told, the average size of the smaller party in a deal reached a record $1.5 billion in the second quarter. This was more than double 2021’s record average size of $619 million, Kaufman Hall found.

A couple of recent transactions illustrate the trend toward partnerships with skilled nursing facilities, the report noted. Hackensack Meridian Health announced in late March that the majority of its long-term care facilities would be acquired by Complete Care, and in April, Virtua Health announced the sale of its two skilled nursing facilities to Tryko Partners. Kaufman Hall advised Virtua Health in the transaction.

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