Healthcare deals were up 56% in 2021, with a few topping $5 billion
Healthcare deals were on the rise in 2021, according to a new report from PwC.
In the 12 months ending in November, healthcare deals were up 56% versus 2020. Physician medical groups, managed care and rehabilitation sectors were top targets for deals this year. At the same time, there were nine megadeals worth at least $5 billion or more, in addition to traditional IPOs and IPOs backed by special purpose acquisition companies (SPACs).
There were 400 deals in the physician medical group space in 2021, compared to between 200 and 215 per year from 2017 to 2019. There are a few factors driving consolidation in the space, including the possibility of payment cuts from the Centers for Medicare and Medicaid Services (CMS) next year.
The number of megadeals during the year indicates healthcare deals in 2022 could also be lively and plentiful, the report indicated. There were seven non-SPAC megadeals during 2021, compared to just one each in 2019 and 2020. Megadeals during the year included four targeting the contract research or manufacturing space (all classified as other services, boosting that subsector’s total deal value); Humana’s acquisition of the remaining 60% stake it did not own in Kindred at Home; and two deals related to Walgreens Boots Alliance: its divestiture of its Alliance Healthcare business and its increase of its stake in primary care-focused VillageMD.
It’s also likely there will be more IPOs in the years ahead. After several years of no pure play healthcare IPOs, two happened in 2020 and eight happened in 2021.
However, private equity and corporate capital faced high industry-wide EV/EBITDA multiples this year. Multiples have dropped among four of the seven healthcare subsectors tracked by PwC
“The pandemic’s not over but health services and private equity firms are finding plenty of opportunities to invest and grow,” said Nick Donkar, PwC’s U.S. health services deals leader. “That said, resilience and unlocking value are front and center as competitive and regulatory pressures loom.”
Looking ahead, healthcare deals could face more scrutiny and longer review times from both federal and state regulatory agencies. Health system consolidation has become more scrutinized over the past few years and even caught the attention of Congress, which has been interested in healthcare consolidation’s impacts on patients and their ability to pay for care.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."