The COVID crisis has shushed but not silenced hospitals’ talks on mergers and acquisitions in 2020. In fact, there are signs the pandemic may be spurring rather than slowing such deals.
The findings and observation are from the healthcare management advisory firm KaufmanHall, which has released an analysis of last year’s M&A activity involving hospitals and health systems, along with a forecast for 2021.
The year just past saw 79 announced transactions. While that count represents a substantial drop from 2019’s 92, it’s not as far off the 10-year par as might have been expected.
And while COVID-19 has almost certainly played a role in dampening deals, it may also have inspired some creative thinking around strategic partnerships and tactical transactions, the report authors suggest.
One possible piece of evidence supporting that theory: In 2019 there were three mergers in which the seller or smaller partner had more than $1 billion in annual revenue.
The count of such “mega mergers” jumped to seven in 2020.
Other findings of interest in the report:
Transactions involving a for-profit partner represented 37% of announced transactions, up from 23% in 2019.
The number of financially distressed sellers dipped from 20% in 2019 to 16% in 2020.
The average size of smaller partner by annual revenue increased to $346 million, up from $278 million in 2019.
As for the year ahead, 2021 promises to be a transformative year in healthcare,” the authors comment. “With COVID-19 vaccines now being administered around the country, a potential end to the pandemic is in sight. But the lessons of the pandemic will be a catalyst in reshaping the U.S. healthcare system for years to come.”
KaufmanHall, whose clients include hospitals and health systems mulling or making M&A deals, is offering the full report in exchange for the requester’s contact info.