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Health care sector continues to be a hotbed of mergers and acquisitions


Report shows that despite many obstacles, health care deals are still being pursued by investors

Despite high interest rates, antitrust concerns, in-flux valuations, and recession fears, health care deal volumes have remained resilient through mid-May 2023, according to a report from consulting firm PwC.

Mergers remain strong: ©Vitchie81 -

Mergers remain strong: ©Vitchie81 -

The outlook for the remainder of the year is positive, with both corporate and private equity investors having large sums of capital that needs to be invested in an environment where health services companies need to adapt and reinvent themselves.

According to the report, health services deal volumes in the 12 months ending May 15, 2023, declined 4% from levels seen in 2022. However, volumes remain at nearly twice the levels seen from 2018 to 2020. Deal values declined by 15%, a continuation of the trend seen in 2022 where a greater portion of deal volume is being driven by smaller value roll-up and add-on transactions as opposed to transformational platform deals and megadeals.

Megadeals are defined as have a value of $5 billion or more, and more than half off the announced deal values in the 12 months ending May 15 were of this type. The report list the deals as follows:

  • CVS’ $10.6 billion acquisition of Oak Street Health, a network of primary care centers for older adults on Medicare; Village MD’s (a Walgreens subsidiary) $8.9 billion acquisition of Summit Health-City MD, a provider of primary, specialty, and urgent care services; and the $7.1 billion acquisition of Syneos Health, a multinational CRO, by a private investment consortium including Elliott Investment Management, Patient Square Capital, and Veritas Capital. These three deals collectively represent $26.6 billion of the total $38.2 billion of other services deal value in the 12 months ending May 15, 2023.
  • Other megadeals include CVS’ acquisition of Signify Health for $8 billion (home health and hospice subsector), Mediclinic International’s $7.4 billion acquisition by a consortium of investors (hospitals subsector), and Chubb’s $5.4 billion acquisition of Cigna's life, accident and supplemental benefits businesses (managed care subsector).

PwC notes that markets are being reshaped by technology and disrupted by geopolitical unrest, a global pandemic, and economic shocks, pushing CEOs to make transformative acquisitions to reposition and reinvent their businesses for long-term success. Companies are also beginning to crack the code on how to make big, transformative deals successful.

Medicaid redetermination is one of the challenges the industry faces, but payers and benefit managers see it as an opportunity to capitalize on expected member growth in the exchange and in employer-sponsored plans, according to the report. The reduced Medicaid enrollments may drive some companies to sell to a better-positioned buyer to survive. PwC also says the three-year risk adjustment-based reimbursement declines partially alleviated market fears around Medicare Advantage programs, “the continued focus on risk adjustment normalization presents opportunities for managed care, benefit management, and point solutions programs to differentiate themselves in driving lower costs of care, and in turn, volume share in the broader payer and related support services segment,” the report reads in part.

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