Correlation doesn’t prove causation, but the evidence is hard to ignore. April healthcare M&A took a hit as COVID-19 forced businesses to close, workers to stay home, and providers to divert all their attention toward treating the flood of infected patients. Compared with last March, April saw a 21% drop in activity and a 34% drop compared with April 2019.
The decline was even more pronounced among the sectors. Long-Term Care, an unfortunately hard-hit industry from the pandemic, suffered a profound drop of 40%. Our colleagues on the senior care side used the word “anemic” to describe the second half of April for Long-Term Care transactions. Half of the month’s deals closed in the first two days, leaving just 10 announced deals in the remaining four weeks.
Oddly enough, eHealth also took a hit, dropping 50% compared with March and 38% compared with April 2019. That would be the one sector we expected would see some spikes, as demand for telehealth and remote patient monitoring companies is growing.
Hospital M&A saw a gain of 33% over March’s total, but on just two deals. Compared with a year ago, the sector nearly tripled April 2019’s total. Despite the dire financial condition hospitals seem to be in during this pandemic, the Hospital market is still moving along.
Most of the tech sectors fared a little better, albeit posting single-digit gains. Even as pharmaceutical firms are racing to find a cure for COVID-19, companies like Pfizer (NYSE: PFE) and Gilead Sciences (NASDAQ: GILD) are still pursuing other ventures, signing collaboration agreements on new therapies.
COVID-19 might push up demand for medical device companies such as Breethe, which developed a novel, compact extracorporeal membrane oxygenation (ECMO) system for patients with a severe or life-threatening illness that stops their lungs from working properly. The buyer, Abiomed, Inc. (NASDAQ: ABMD) was looking to expand its product portfolio.
Deal value took an arguably bigger hit, as most buyers probably put any big deals on hold as the stock market and valuations fluctuate. Compared with March, April healthcare M&A spending dropped 82% in deal value and 23% compared with April 2019. Some major deals, including Molina Healthcare, Inc.’s (NYSE: MOH) purchase of Magellan Complete Care from Magellan Health, Inc. (NASDAQ: MGLN) for $850 million cash and TPG Capital’s majority investment into LifeStance Health for $1.2 billion were not enough to lift deal value substantially.
