After a quiet spring, health services deal appetites seem to have returned. There were pockets of sub-sector growth and multiple deals over $1 billion, including one megadeal (defined as over $5 billion).
We anticipate proactive deal makers will find attractive opportunities in 2021, even as multiples remain elevated. The sector-wide mean enterprise value to EBITDA multiple for the 12 months through November 15 ticked up to 14.5x from 14.4x in 2019.
Investments in 2021 may focus on organizational resilience, innovative technology, new care delivery channels, alternative ways of working, or mitigating competitive pressures.
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021.
PwC's Deals Sector Leader John Potter discusses the trends driving deals and outlook for 2021. Explore national deals trends.
Even as the pandemic continues, some previous sector deal dynamics endure. For example, the Long-Term Care sub-sector remains the highest in deal volume, a trend since at least 2014. Deals growth in other sub-sectors points to additional ongoing patterns. For example, the number of deals targeting the Labs, MRI & Dialysis sub-sector increased for the second year in a row, possibly because of ongoing pricing pressure-driven consolidation in the labs market. There were also more deals targeting the Other Services sub-sector, which includes medical office buildings – a theme we highlighted in our mid-year report.
2021 may not see vast numbers of pure health services IPOs – they are relatively rare even in more stable times. Mirroring 2019, 2020 saw two IPOs. This year’s were both in the primary care space, including one mid-pandemic (Oak Street Health), indicating continued demand for this specialty.
Special purchase acquisition companies (also known as SPACs) could continue to play a role in large deals. The largest health services deal in the 12 months through November 15 was July’s $11 billion Churchill Capital Corp III-MultiPlan, Inc. combination.
In all, despite COVID-19 challenges, the second half of 2020 saw seven deals larger than $1 billion, including two other SPAC transactions: Cano Health LLC – another primary care company – and Clover Health Investments Corp., a Medicare Advantage insurer. The timing of these deals could suggest continued appetite for large deals in 2021. It’s harder to draw conclusions about year-over-year declines in deal values by sub-sector because of the large number of deals without disclosed values.
“In 2021, deals or restructuring could be a matter of survival for some companies. For others, they are likely to be a tool for growth and enabling efficiencies, as COVID-19 uncertainty, competitive pressures, and technological imperatives evolve.”
PwC Partner, US Health Services Deals Leader, PwC US
Deals Partner, PwC US