Healthcare deals were still happening at a quick clip during the third quarter of the year, but the value of deals declined, according to the latest analysis from PwC.
During the quarter, deal value closed at its lowest level since the first three months of 2017, though megadeal interest was steady, according to the data. From the previous quarter, deal value dropped 35.8 percent, to $15.9 billion. The 261 deals during the quarter were down 10.8 percent from the previous quarter, but up 0.4 percent from the same time period a year ago.
The maintenance of high deal volume underscores that mergers and acquisitions in the space are likely to remain strong through the end of the year, even as healthcare regulations and policy discussions are at the top of mind for the industry. Two ongoing megamergers––CVS Health’s pending $69 billion merger with Aetna and Cigna’s $67 billion purchase of Express Scripts––could also influence more disruptive transactions through the end of the year and beyond.
The largest transaction during the quarter was RCCH HealthCare Partners’ $5.6 billion acquisition of LifePoint Health. This deal, which was the only megadeal during the time period, was worth 34 percent of the total deal value recorded during the third quarter.
“While overall deal value has decreased in the recent quarter, volume levels remain strong across numerous sub-sectors both in the corporate and private equity arenas,” Thad Kresho, US health services deals leader at PwC, said in the analysis. “We expect this momentum to carry through the remainder of 2018, and beyond, as the pool of potential acquirers continues to expand.”
Quarterly deal volume has been steady since the end of 2014, with deal counts exceeding 200 since the fourth quarter of 2014, and exceeding 250 over the last five consecutive quarters.
The quarter held three other deals that topped $1 billion, including UnitedHealth Group’s purchase of an 80 percent stake in Genoa Healthcare. The highest deal value in the quarter’s transactions was in the hospitals sub-sector, with 51 percent of value—mostly thanks to the RCCH HealthCare Partners-LifePoint Health deal. Long-term care had the most deals as a sub-sector, with 102 transactions, but was the third-largest by deal value.
In year-over-year growth, behavioral care increased 66.7 percent, the highest rate of growth. Hospitals deal value rose 4,710.8 percent year over year, compared to 343.6 percent for behavioral health. Rehabilitation deal volume dropped 70.6 percent year over year.
Trading multiples rose the highest in home health and hospice, while managed care and acute care had the lowest trading multiples of the sub-sectors.