After an avalanche of deals in the fourth quarter of 2020, healthcare M&A activity and announcements just keep piling on in the opening weeks of 2021. As of the afternoon of January 15, there are 139 deals recorded in our Healthcare Deals Database, with many more to add as they hit the newsfeeds.
Demand for physician groups has swelled, after a rough 2020 for the sector, hitting 30 deals. That’s followed by 20 deals in the eHealth sector, 19 in Other Services and 15 in the Long-Term Care sector as the sectors with the highest amount of activity. To put the numbers in perspective, there were 60 physician group deals in the fourth quarter (the highest of 2020), so if the pace continues, we expect that number to be topped.
What’s causing the surge in healthcare M&A activity? We expect that just many dealmakers are antsy after a long year of lockdowns, and wanted to get back to business. Although many of the deal announcements came in January, they often were effective by January 1, giving investors a chance to kick off the new year strong. Also, despite some truly wild and unfortunate news coming out D.C., investors have reason to be confident for the future. Countries around the world are approving Covid-19 vaccines from Pfizer and other biotechnology firms, which means there’s an end in sight for the pandemic, even if the road ahead is still very bumpy for vaccine rollout, logistically speaking.
The largest deal of the month by transaction price was the purchase of Change Healthcare (NASDAQ: CHNG) by Optum, a member of UnitedHealth Group (NYSE: UNH). The transaction is valued at $13.17 billion, consisting of $8 billion in cash ($25.75 per share) and approximately $5.17 billion in assumed debt. The price is a 41% premium to Change Healthcare’s closing price on January 5, 2021. The addition of Change Healthcare for Optum will most likely synergize with other companies under UnitedHealth Group’s digital health platform.
In the services sectors, we’ve had a few substantial transactions. Centene Corporation (NYSE: CNC), the multi-national managed care giant, acquired Magellan Health, Inc. (NASDAQ: MGLN), a healthcare management company specializing in behavioral health and pharmacy benefits. The deal is valued at $2.2 billion, or $95 per share. Following the merger, Centene will have one of the nation’s largest behavioral health platforms across 41 million unique members.
Priory Group sold a portfolio of approximately 40 select behavioral health facilities located in the United Kingdom to Medical Properties Trust, Inc. (NYSE: MPW). The Birmingham, Alabama-based REIT will pay approximately GBP 800 million, or $1.087 billion, plus customary stamp duty tax and other transaction costs.
To stay up to date on all this month’s activity, keep an eye out for our monthly newsletter and check out our upcoming Health Care M&A Quarterly Report.