U.S. health services merger and acquisition (M&A) total deal value rose 152 percent to $12.3 billion during the first quarter of 2014 compared to the same period in 2013, according to Q1 2014 US health services deals insights, a quarterly analysis of M&A trends and outlook for the health services sector issued today by PwC US.
“While deal activity held steady during the first quarter of this year compared to Q1 2013, having deal value jump 152 percent is an indication of renewed confidence in the industry as the dust settles from the implementation of the Affordable Care Act,” said Brett Hickman, partner and PwC’s U.S. healthcare deals leader. “Several indicators that we track point to robust M&A activity for the rest of the year. The impetus for greater alignment and size remains unchanged in the hospital sector – and for managed care deals, an increase is likely as these companies work to meet the required ACA milestones. Combined with positive signs we’re seeing in the other health services sectors, we’re optimistic that there will be heightened deal activity in 2014.”
In the first quarter of 2014, the total volume of deals remained consistent with the same period in 2013. From a sector perspective, hospital deal volume experienced a decrease when compared to Q1 2013, down from 21 in Q1 2013 to 12 in Q1 2014, a nearly 43 percent drop-off. However, deal value increased from $320 million in Q1 2013 to $388 million in Q1 2014. According to PwC, the softened deal activity during the first three months of 2014 does not necessarily indicate a slowdown. Hospitals continue to assess strategic alternatives, specifically addressing their market position, long-term strategy and the recent large transactions which have reinforced a “bigger is better” mentality within the hospital sector.
M&A activity in the managed care sector was up slightly in Q1 2014 as deal volume increased 150 percent relative to Q1 2013. Deal value was not disclosed for any of the deals announced in Q1 2014.
The long-term care sector has started the first quarter of 2014 where it left off in 2013, leading the sectors in both volume and value, as well as making gains over the first quarter in 2013. Long-term care deals highlighted in the quarter, in conjunction with positive operating trends, will continue to build confidence in decision makers and help support strong M&A trends in this sector.
Home health and rehabilitation have started at a slower pace, with smaller volumes and values recorded compared to the first quarter in 2013. There were just two deals in the home health and hospice sector (values were not released) and six deals in the rehabilitation sector.