After a strong start to the year, deal activity has finally cooled off. During February, there were 135 healthcare deals, a 53% decrease from January 2022, which had a record-breaking 290 deals. Such a drastic drop is to be expected. The market naturally goes into an ebb and flow, and historically, January is always much busier than February. Additionally, the deal total last month wasn’t far off from what we saw in February 2021, when there were 142 deals across all sectors.
The busiest sector during February 2022 was Other Services, which had 32 announced transactions across a wide range of sectors, including medical office buildings, ambulatory surgery centers, contract research organizations, health clinics and more. Deal volume dropped by 55% from January 2022 when there were 71 deals. Other Services made up approximately 25% of all February 2022 transactions. Although Other Services took a significant hit during February, it was just a 9% decrease from the 35 transactions we saw during February 2021.
Another busy sector during February was Physician Medical Groups (PMG), with 24 announced deals, making up nearly 19% of all deals across both the Services and Technology segments. This is a more than 67% decrease from January 2022’s deal total, when there were a whopping 77 transactions announced within the PMG sector.
The largest PMG deal of the month, based on price, was Partner Group’s acquisition of OMERS Private Equity’s majority stake in Forefront Dermatology, a leading dermatology group practice. The transaction valued Forefront at $1.5 billion, according to sources familiar with the deal terms. OMERS will retain a minority stake in the company.
The total announced transaction value for all sectors in February was more than $27.5 billion, which is a 25% decrease from February 2021, which had $36.5 billion in announced spending. Even though the total deal quantity decreased from January 2022, the purchase price rose 7% from $25.7 billion, which indicates that companies are making larger acquisitions.
The largest deal of the month, as well as the year, so far, was the $18 billion strategic combination of Healthcare Realty Trust (NYSE: HR), a real estate investment trust focusing on health care, and Healthcare Trust of America (NYSE: HTA), which closed on February 28.
Healthcare Trust of America, Inc. is the largest dedicated owner and operator of medical office buildings in the United States, comprising approximately 25.3 million square feet of gross leasable area, with $7.5 billion invested primarily in medical office buildings across the country.
Although month to month, healthcare M&A activity suffered a steep decline, we wouldn’t say this is a cause for alarm. With 135 deals on the books, the market is still healthy, even if the numbers have cooled off a bit. It’s important to note that January 2022 was an abnormally busy month, with activity skyrocketing across all sectors. Now, deal activity is actually coming back down to more normal numbers. Although we don’t expect to see numbers like January 2022 again anytime soon, if this year follows the same trend as last, we expect deal activity to pick up to more exciting levels in the coming months. Stay tuned!
