With more than 1,180 total transactions valued at a whopping $121.5 billion, 2018 was a record-breaking year for health care dealmaking volume. The home health and hospice segments, in particular, saw the highest multiples.
The latest insights into health care dealmaking come from the 2018 year-end report from international auditing and accounting powerhouse PricewaterhouseCooper (PwC). Overall, last year’s deal volume was a 14.4% increase compared to 2017, a jump largely attributed to health services companies pursuing deals to address regulatory uncertainty, high costs and cross-industry models.
PwC analyzed data from Irving Levin Associates platforms, as well as Dealogic Equity Capital Markets Analytics, S&P Capital IQ and publicly available transaction information for the report.
Home health deals accounted for about 7% of all health care dealmaking volume in 2018 and roughly 1% in total value. On a year-over-year basis, home health deal volume and value increased by 30.2% and 64.5%, respectively.
“This trend continues on the interest levels exhibited the past several years by both strategic and private equity buyers in this sector,” PwC U.S. Health Services Deals Leader Thad Kresho told Home Health Care News. “We expect to see continued activity on both the home health and hospice sectors in the coming year as participants seek to increase scale and geographic presence across the country.”
Factors driving deal activity include regulation, policy and tax reform, as well as in-patient volume pressure and high costs, according to PwC. Additionally, dealmakers are seeking cross-industry moves that boost vertical integration.
Home health deals only accounted for about 1% of the overall $121.5 billion in value, despite the home health and hospice segments posting the highest multiples for the third consecutive quarter.
“We expect to see continued activity on both the home health and hospice sectors in the coming year as participants seek to increase scale and geographic presence across the country.”
PwC U.S. Health Services Deals Leader Thad Kresho
Even with a handful of mega-deals alone accounting for more than $85 billion, 2018’s total deal value declined about 31.4% compared to the prior year. Those deals include private equity group KKR’s June acquisition of Envision Healthcare Corporation (NYSE: EVHC), one of the largest doctor-staffing companies in the U.S. with roughly half a dozen in-home care entities.
The long-term care segment was once again the largest sub-sector by deal volume, according to PwC. Since at least 2015, the long-term care segment has had at least 300 deals per year, routinely accounting for about 30% of total deal volume.
2019 is also expected to be another strong year for health care dealmaking, PwC projects.
“Although 2019 has started with some economic and regulatory uncertainty, a number of signs suggest that interest in deals will continue this year,” Kresho stated in the report. “Corporate and private equity buyers both have access to significant levels of capital, and with double-digit volume growth in some sub-sectors, it’s clear that deals are seen as an important strategy in an increasingly cost- and consumer-conscious ecosystem.”