Healthcare merger and acquisition activity held steady in the fourth quarter of 2017. Compared with the third quarter, deal volume increased 1%, to 377 transactions. Deal volume was lower than the same quarter in 2016, down 3%. Combined spending reached $114.4 billion, up 166% compared with the $43.1 billion spent in the previous quarter, according to HealthCareMandA.com. Fourth quarter deal value was 197% higher than the $38.6 billion spent in Q4:16.
Health Care M&A Market – Deal Volume by Sector
| Q4:17 | Q3:17 | Q4:16 | |||
| Sector | Deals | Deals | Change | Deals | Change |
| Services | |||||
| Behavioral Health Care | 12 | 14 | -14% | 10 | 20% |
| Home Health & Hospice | 13 | 12 | 8% | 24 | -46% |
| Hospitals | 21 | 15 | 40% | 23 | -9% |
| Laboratories, MRI & Dialysis | 16 | 15 | 7% | 9 | 78% |
| Long-Term Care | 70 | 74 | -5% | 93 | -25% |
| Managed Care | 10 | 8 | 25% | 4 | 150% |
| Physician Medical Groups | 32 | 43 | -26% | 28 | 14% |
| Rehabilitation | 11 | 17 | -35% | 11 | 0% |
| Other | 51 | 51 | 0% | 45 | 13% |
| Services subtotal | 236 | 249 | -5% | 247 | -4% |
| Technology | |||||
| Biotechnology | 49 | 42 | 17% | 56 | -13% |
| eHealth | 30 | 42 | -29% | 30 | 0% |
| Medical Devices | 28 | 23 | 22% | 23 | 22% |
| Pharmaceuticals | 34 | 17 | 100% | 33 | 3% |
| Technology subtotal | 141 | 124 | 14% | 142 | -1% |
| Grand Total | 377 | 373 | 1% | 389 | -3% |
Source: HealthCareMandA.com, January 2018
Deal volume for the full year 2017 reached 1,566 transactions, down 2% compared with 1,593 transactions in 2016. Dollar volume was more robust, up 23% compared with 2016, to $315.3 billion.
Healthcare services transactions made up 63% of the quarter’s deal volume, and an unusually strong 87% of the quarter’s dollar volume ($99.4 billion). The spending surge is the result of the $77 billion CVS Health/Aetna announced in early December, in the Managed Care sector. That deal alone accounted for 67% of the quarter’s total spending.
Long-Term Care remained the most active of all the sectors, although quarterly deal volume continued to slip. The 70 deals announced in the recent fourth quarter are 5% lower than the previous quarter (74 transactions). Among the services sectors, Hospitals, Laboratories/MRI/Dialysis, Rehabilitation and Other Services were the only sectors to equal or increase deal volume levels above the previous quarter.
The technology sectors showed some improvement versus the year-ago quarter, except for Biotechnology, which dipped 13%. Compared with the previous quarter, all showed higher deal volume, with the exception of eHealth (-29%).
“M&A in the fourth quarter of 2017 saw a new focus on consumerism in healthcare,” said Lisa E. Phillips, editor of HealthCareMandA.com. “The CVS Health/Aetna deal is supposed to create community health hubs. We expect to see a few more atypical match-ups like that in 2018, where acquirers look for targets in a different sector.”