Value of M&A activity down, volume nearly flat so far in 2017

Mergers and acquisition (M&A) activity in healthcare isn’t slowing down, with the first quarter of 2017 being the tenth straight with more than 200 deals. What did change, according to a report from PricewaterhouseCoopers (PwC), was the disclosed value of those transactions.

Approximately $7.9 billion worth of deals were disclosed, a 49.3 percent drop from first quarter of 2016 and 58 percent lower than the prior quarter. Much of that amount was wrapped in two “megadeals”—the acquisition of Surgical Care Affiliates by Optum (which PwC values at $3.3 billion, more than the $2.3 billion announced by the companies) and American Securities’s $2.5 billion purchase of Air Methods Corporation.

The Optum-SCA deal was the sole reason why physician medical groups saw the biggest jump in value for M&A activity, as the other 47 deals didn’t disclose financial terms.

Growth was relatively flat, with a 0.9 percent year-over-year increase and a 2.6 percent jump from the fourth quarter of 2016. PwC described overall volume of M&A activity as healthy, however, with 235 deals announced in the first three months of the year.

Long-term care remained the most active sub-sector, with its 73 deals accounting for 31 percent of all M&A activity in healthcare. Most sub-sectors saw a decline in volume, like a nearly 30 percent decline in hospital M&A activity, but there were some increases in other areas, like a 25 percent increase in the number of deals in the lab, MRI and dialysis sub-sector.

The report doesn’t include what is so far the biggest healthcare acquisition of the year: the $6.1 billion sale of Medtronic’s medical supplies unit to Cardinal Health, a deal announced April 18.