Guest Blog: Q4 2016 Healthcare Services M&A Pulse – Volume, Value, Multiples

By 0 No tags Permalink 1

Guest blog from David Lopez, CMAA.  David is a licensed SEC/FINRA registered representative with proven expertise in sell and buy side mergers and acquisitions, private placements, and strategic corporate development to growing and established healthcare services, healthcare IT, and medical device companies.

2016 Ends Strong Despite Lower Volume & Values

M&A activity in US Healthcare Services remained strong in 2016 when compared to other industries, despite seeing lower year over year deal values and volume. Overall deal volume in 2016 was slightly lower (1.4%) then in 2015, while deal value was significantly lower (59.6%) primarily as a result of several large 2015 Managed Care deals. 2016 Q4 was basically flat vs. Q3 with little movement both up and down on deal volume (1.3%) and deal value (-8.7%). The Affordable Care Act (ACA) continues to have a significant influence in Healthcare Services M&A driving both vertical and horizontal integration, as the shift from traditional fee-for-service reimbursements moves towards value-based payment models, spurring consolidation and resulting in larger but fewer players in the industry. However, despite the new administrations promise to repeal and replace the ACA the shift towards value-based care is not intrinsically tied to it, thus Healthcare Services transaction activity should remain strong in 2017 as payers and providers look to provide care at a lower cost with better outcomes.

Healthcare Services deal volume in 2016 saw a total of 939 transactions, which was a decrease of 5.9% from 2015. Total deal volume was lead by Long-Term Care with 337 deals, followed by; Other Services (196), Physician Groups (119), Hospitals (89), Home Healthcare (55), Labs, MRI (41), Behavioral Health (41), Rehabilitation (40), and Managed Care (21).

Healthcare Services deal value in 2016 resulted in a total of $72B, which was down roughly 60% when compared to 2015. Total deal value was lead by Long-Term Care with a figure of $14.3B, followed by; Hospitals ($13.9B), Physician Groups ($13.2B), Labs, MRI ($11.5B), Other ($11.5B), Behavioral Care ($3.4B), Managed Care ($1.7B), Home Health Care ($1.1B) and Rehabilitation ($712M).

Healthcare Services 2016 industry-wide average enterprise valuation multiples (EV/EBITDA) saw a slight dip of 0.4x to 12.4x in Q4. Home Health/Hospice ended the year with the highest TTM multiple of 15.2x, which was followed by; Outsourcing (14.6x), Labs/Imaging (14.1x), Ambulatory Care/Dental/Rehab (12.6x), Managed Care (11.2x), SNF’s/LTACH’s (10.2x), and Acute Care (9.1x).

(Sources: Health Care M&A Information Source, S&P Capital IQ, PwC)


No Comments Yet.

Leave a Reply

Your email address will not be published. Required fields are marked *