COVID-19 drove increase in size of healthcare mergers

While the number of healthcare mergers fell, the average transaction size skyrocketed.

COVID-19 drove increase in size of healthcare mergers

Hospital and healthcare system mergers fell in the first quarter of 2021, but the average transaction sized soared.

According to a news release, a new analysis from industry consultant Kaufman Hall found there were only 13 announced deals in the first quarter of 2021, compared to 29 announced deals the previous year.

Meanwhile, the average seller size by revenue was $676 million due to the pandemic-spurned rise in so-called mega merges, involving two companies with more than $1 billion in annual revenues, and transactions with sellers with revenues between $500 million and $1 billion. There was a total of 72 hospitals included in the announced deals, the release says.

There has also been a rise in diversification across markets and revenue sources. These transactions often involve partnerships with well-established systems in local markets, according to the release.

These companies are also recognizing that, while smaller health systems may not have the financial scale of large systems their understanding of local health issues provide a significant advantage for growth, the release says.

The full analysis can be found here.

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