US Health Services deals insights Year-end 2019

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Sustained total deal volume and higher multiples in 2019

Health Services saw more than 1,200 deals in 2019 for the second year in a row, and ended strongly, with the tenth consecutive quarter of more than 250 deals. Long-Term Care was, again, the largest sub-sector by volume throughout 2019.

Excluding megadeals in both 2018 and 2019, total deal value increased by 77%, with Q4 2019 representing the largest quarter in at least five years. 

The year also saw the end of a three-year IPO drought, with two IPOs in specialty areas.

The sector-wide mean EV/EBITDA multiple saw an increase, to 15.1x, buoyed by Home Health & Hospice.

“2020’s uncertainties – ACA’s future, macroeconomics, the election – don’t suggest less future deal interest. Rather, given available capital, companies are likely to see deals as a resilience strategy.”

Nick Donkar, US Health Services Deals Leader

High level trends and highlights, 2019 and Q4 2019

Total deal value and volume

The Health Services sector has seen more than 1,000 deals per year since 2016. Stable or increasing deal volumes in six sub-sectors countered declines in three others, resulting in a 2019 total similar to 2018.

Excluding megadeals in both 2018 and 2019, total deal value increased by 77%, with Q4 2019 representing the largest quarter in at least five years.

Although 2019 saw only one megadeal (versus the average of three per year over 2014-2018), the transaction – Centene-WellCare – was the third-largest since at least 2014.

Long-term care largest sub-sector by volume

In volume terms, Long-term care has been the largest sub-sector since at least 2014, with approximately 30% to 45% of quarterly deal volume. 2019 was no different, ending with 100 deals (34% of the quarter) in Q4 2019, and 437 deals (36% of the year) total.

Among deals with disclosed acquirers, The Ensign Group, Inc. and Welltower Inc. were the most active buyers targeting the sub-sector, with 15 and 14 deals, respectively.

In terms of full-year deal value, Other Services was the largest sub-sector (23%), bolstered by five deals valued at more than $1 billion, followed by Managed Care (21%), which saw the year’s only megadeal (Centene-WellCare).

Increase in $1 billion+ deals

2019 saw more than 20 $1 billion+ deals, but only one megadeal: Centene Corporation’s acquisition of WellCare Health Plans, Inc., which expanded Centene’s Medicare and Medicaid assets.

The second largest deal of 2019 had an international focus. Bermuda-based Brookfield Business Partners L.P. acquired Healthscope, Ltd., a large Australian hospital operator with 24 pathology laboratories in New Zealand.

UnitedHealth Group’s acquisition of Equian LLC from New Mountain Capital was 2019’s third largest corporate deal.

Q4 2019 saw five deals worth more than $1 billion. For example, on the corporate side, BMI Healthcare, Britain’s largest private hospital chain, sold the real estate of 30 acute care hospitals to Alabama-based Medical Properties Trust, Inc. On the private equity side, Cinven and Astorg purchased LGC Group from KKR & Co. L.P., expanding its healthcare business.

Multiples end the year on a high

Sector-wide LTM multiples were elevated throughout 2019, continuing the streak (since Q1 2017) of no quarter dropping below 12.0x.

Since Q4 2018, multiples had begun to decline on a year-over-year basis, but Q4 2019 broke that pattern. The sector-wide multiple mean reached its highest level in years (15.1x), increasing 2.3x over LTM 2018. For the first time since Q2 2018, not a single sub-sector declined year-over-year.

The sector-wide average was buoyed by the Home Health & Hospice sub-sector, which showed the greatest gain as well as the highest level, surpassing 26.0x. These companies’ market capitalization grew by more than any other sub-sector’s companies’ — more than 50% on both a mean and median basis. Drivers included reimbursement changes and multiple acquisitions.

Multiples remain comparatively low in Acute Care, Ambulatory Care/ Rehab/Dental, and Managed Care.

IPOs reappear

After a multi-year drought, 2019 saw two Health Services IPOs in sector specialties.

IMAC Holdings, Inc. — previously excluded from our analysis due to its small deal size of $4 million — provides orthopedic rehabilitation services. Progyny Inc., the larger of the two companies, is a rapidly growing fertility benefits management company.

2020 could see additional IPOs, such as One Medical, which filed papers in early January.

Health Services sub–sector analysis

Sub-sector growth dynamics were mixed in 2019. Three sub-sectors grew in terms of both volume and value: Managed Care (bolstered by the year’s single megadeal), Long-Term Care and Hospitals. Additionally, Labs, MRI, and Dialysis deal value grew (503%), but volume was flat.

Four sub-sectors experienced deal value declines. However, in two cases, Physician Medical Groups and Other Services, these declines were due to unusually high 2018 values driven by megadeals: KKR & Co. L.P.-Envision and Cigna-Express Scripts, respectively. Excluding these transactions, the two sub-sectors grew by 166% and 132% over prior year, respectively. Deal value declines in the remaining two sub-sectors, Behavioral Care and Home Health & Hospice, can be partially explained by declines in the number of deals with disclosed deal values.

Looking to quarterly performance, Hospitals was the only sub-sector whose volumes grew on a year-over-year basis in each of the last three quarters of 2019, but Home Health & Hospice and Managed Care also finished the year with strong positive volume growth.

Health Services deals outlook

A notable decline in deals seems unlikely in 2020, but two broad factors may impact their strategic direction: regulatory events and long-standing sector trends.

Although the Supreme Court declined the petition for expedited review of the Affordable Care Act case this term, they could hear the case in the fall. It seems likely that dealmakers will be trying to navigate uncertainty at least through the end of the year. Additionally, the outcome of the November general election is likely to shape deals strategies in the last months of the year.

On the sector trend front, capital availability persists and will continue driving deals activity. Private equity firms, for example, are likely to continue seeking value-driven models, especially in growing sub-specialties. Private equity firms also remain potential deals partners for payers and providers.

Interest in new technologies, consumerism, and preserving competitiveness also remains high, so we anticipate continued interest in cross-industry and vertical integration-focused deals.

Horizontal integration within sub-sectors is also likely to continue due to its potential to strengthen competitive positioning, mitigate volume pressure and enhance population health efforts.

However, providers’ mergers may face increased scrutiny in 2020, as regulators begin to question their value to consumers and decide antitrust cases (e.g., Sutter Health recently agreed to a $575 million settlement).

Divestitures will likely remain a key strategy in securing large deals, as well as in sharpening company strategy by shedding non-core assets (e.g., Cigna divested its group life and disability business in Q4 2019).

Finally, in addition to traditional mergers and acquisitions, Health Services companies are likely to consider new or modified partnership models, particularly to address social determinants of health and ongoing concerns about healthcare costs and affordability.

Source: Deal Search Online and Health Care M&A News (January, 2020),, company websites and press releases

About the data

Deal volume and value: We defined US M&A activity as mergers, acquisitions, shareholder spin-offs, capital infusions, consolidations, and restructurings where acquisition targets are primarily US-based companies acquired by US or foreign acquirers. Transactions are based on announcement date, excluding repurchases, rumors, withdrawals, and deals seeking buyers. We consider deals to be mergers or acquisitions when there’s a change of control or the makeup of the controlling interest changes. In the instance of an acquisition, one company takes effective control over another company or product. In a merger situation, two boards are combined and/or monies are combined. An affiliation or collaboration is neither considered a merger nor an acquisition. The merger and acquisition data contained in various charts and tables in this report has been included only with the permission of the publisher of Deal Search Online and All rights reserved.

Multiples: Data on EV/EBITDA multiples was sourced from S&P Capital IQ (a division of S&P Global) and includes publicly traded companies in the following sub-sectors: acute care, ambulatory care/rehab/dental, home health & hospice, labs/imaging/pharmacy, managed care, outsourcing, SNFs/ALFs/LTACHs. 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.

IPOs: IPO information was sourced from Dealogic Equity Capital Markets Analytics, for the following sectors: healthcare–practice management, hospitals/clinics, healthcare–miscellaneous services, outpatient care/home care, insurance–multiline.

Contact us

Nick Donkar

Nick Donkar

Partner, US and West Region Health Services Deals Leader, PwC US

Kristan Chesnut

Kristan Chesnut

Deals Partner, PwC US

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