Skip to content Skip to footer

Loading Results

Health services deals insights: 2021 midyear outlook

Playback of this video is not currently available


What's driving deals in 2021

PwC's Deals Sector Leader John Potter and other partners discuss the deals outlook for the rest of 2021.

Unprecedented volumes

Health services deal volumes and values have more than recovered from their early 2020 slump. The fourth quarter of 2020 saw the highest quarterly deal volume ever (352) – then the first quarter of 2021 beat it by 21%, reaching 426.

Deals appetite has persisted despite high multiples — the sector-wide mean enterprise value to EBITDA multiple for the 12 months through May 15 reached 16.1x.

In recent months, the industry has seen six megadeals valued at $5 billion or more, traditional IPOs and special purpose acquisition company-backed IPOs.

Deals in this sector are being driven by forces including capital availability, regulatory shifts, evolving competitive dynamics, promising technologies and commitments to patient-centricity.

Health services deals outlook

In the 12 months through May 15 (LTM), deal volumes and values exceeded 2018, 2019 and 2020 levels. Gains versus full-year 2020 were broad-based, with most subsectors seeing double-digit growth in deal volumes. Some subsectors experienced triple-digit growth in deal values.

Deal volume in long-term care fell slightly during this period, yet the subsector remains the most frequent target for deals. We anticipate this trend will continue.

Compared with 2014-2020 annual average volumes, two subsectors saw notable increases: physician groups (likely related to market fragmentation and pandemic-driven financial pressure), and behavioral care (likely related to long-term and pandemic-driven demand).

Looking ahead, we anticipate ongoing interest in the public markets, given recent activity. For years, there were no pure health services IPOs, but 2021 has already seen four. This count excludes SPAC-backed IPOs, of which there have been at least 10 in the 12 months through May 15. We classify two of these as megadeals.

In the same period, there have been four other megadeals:

  • Two $10 billion-plus deals targeting the contract research organization space (classified as other services in our data, boosting that subsector’s total deal value);
  • Humana’s acquisition of the remaining 60% stake it did not own in Kindred at Home; and
  • Walgreens Boots Alliances’ divestiture of its Alliance Healthcare business.

By comparison, 2019 and 2020 saw just one megadeal each.

Private equity and corporate capital is plentiful and driving demand for assets. Barring surprises — such as a major domestic worsening of the pandemic — we anticipate deal interest at similar levels through year’s end and beyond, despite a high-multiple environment.

EV/EBITDA multiples have dropped slightly in just three subsectors: managed care; labs, imaging and pharmacy; and ambulatory care, rehabilitation and dental. At 26.2x, home health and hospice’s multiple is still the highest in the sector, by far.

“Pandemic progress means dealmakers are starting to refocus on pursuing competitive advantage. We see investors adding capabilities and rethinking ecosystems, with a laser focus on value and patient-centricity.”

Nick Donkar, US Health Services Deals Leader

Key deal drivers

Deals could hedge against and redefine ecosystem dynamics.

Regulatory shifts create opportunities and challenges. Driven by the pandemic, market forces and the new Biden administration, government-backed health coverage has grown, attracting investors. Regulators have paused several Trump administration-era Centers for Medicare and Medicaid Innovation plans and nudged antitrust concerns into the spotlight.

This environment could lead some players to diversify revenue streams, add scale or consider alternative collaboration models. Other regulatory priorities such as price transparency and interoperability create incentives to share and analyze data, to jostle for ecosystem strength and to partner to enhance patients’ and members’ experiences. 

Deals could help companies to create or to defend moats.

As COVID waves recede domestically, resilience imperatives remain. Beyond the last year’s urgent need to fill gaps such as telemedicine capacity, long-term trends that impact competitiveness endure. For example, payers are vertically integrating to control more of the value chain, and hospitals are merging to access growth markets and to preserve bargaining power.

Non-traditional health companies’ continued press into the sector — from Amazon to Walmart — means rethinking traditional models. Complex or multi-entity partnerships — such as the new Hydrogen Health, LLC digital health joint venture — could become more common. Financial buyers continue to target fragmented sub-specialty services, altering market dynamics and pushing companies to reinvent themselves.

Deals could shift companies toward future states.

The pandemic reinforced the criticality of care beyond hospital walls, leading to alliances that add capabilities and enable new offerings. For example, health services companies have formed virtual care joint ventures with digital health vendors, and leading health systems are investing in hospital-at-home collaborations. Other companies have set up investment arms to fund opportunities.

Cost-control innovations also play a critical role in companies’ longevity. For example, payers have invested in AI-powered self-triage tools to direct members to appropriate care.

With so many potential partners and models, dealmakers must carefully evaluate options to identify those that are truly impactful.

Deals could enable more holistic care, maximize data and serve communities.

Health services collaborations tend to reflect a commitment to patient- and member-centric missions and an understanding of financial rewards for such strategies.

For instance, transactions that extend service lines and expand company scope can also increase care access. Partnerships with community organizations that alleviate social determinants of health can also improve revenue cycle management. Alliances that pool and mine data can also boost population health. Pharmaceutical and life sciences data partnerships that enhance clinical trials can also provide new revenue streams. Technology investments such as ambient sensing technology that ease physician burnout can also increase efficiency. 

About the data The merger and acquisition data contained in various charts and tables in this report has been included only with permission of the publisher of All rights reserved.

S&P Capital IQ: Information provided by or through third parties is provided “as is,” without any representations or warranties by PwC or such third party. PwC and such third parties disclaim any contractual or other duty, responsibility or liability to client and any person or entity that receives such information.

Contact us

Nick Donkar

Nick Donkar

Partner, PwC US

Kristan Chesnut

Kristan Chesnut

Deals Partner, PwC US

Follow us

Required fields are marked with an asterisk(*)

By submitting your email address, you acknowledge that you have read the Privacy Statement and that you consent to our processing data in accordance with the Privacy Statement (including international transfers). If you change your mind at any time about wishing to receive the information from us, you can send us an email message using the Contact Us page.