The healthcare M&A market slowed significantly in November, according to preliminary data in our LevinPro HC database. You could blame the holiday season or a few other extraneous events, but volume plunged by 31% compared with activity in October, dropping from 175 deals to just 120. Change in year-over-year volume was even more pronounced, falling by 34% compared with activity in November 2023. Although we expect to find more deals in the coming weeks (and from future SEC filings), November has been the slowest month of the year, with healthcare M&A numbers averaging 160 deals per month.
On the other hand, spending soared during the month. In November, announced spending hit $14.52 billion, more than double the $6.4 billion reported in October. The rise in spending can be attributed to some high-value deals in the physician market: Cardinal Health bought GI Alliance for $2.8 billion and Cencora, Inc. acquired Retina Consultants of America for $4.6 billion. GI Alliance and Retina Consultants of America are both management services organizations with a nationwide reach.
Aside from those two high-profile deals, the physician market suffered the largest month-to-month decline in activity from October to November (38 deals to 20, or 47%). Other Services, which includes a range of ancillary sectors, fell from 50 deals to 28. The healthcare real estate market was not immune either; there were only 16 medical outpatient transactions in November, compared with 29 in October. Several buyers were kept confidential in the deal announcements, but investors like Montecito Medical Real Estate remained steadfast in November, acquiring five properties across four deals. In Richmond, Virginia, the real estate investment firm purchased a two-building medical outpatient portfolio, which offers a combined total of 18,178 square feet. The buildings are leased out to Dermatology Associates of Virginia and Pulmonary Associates of Richmond, market-dominant providers in their respective specialties.
The largest deal in the Other Services sector was GHO Capital Partners LLP’s $1.1 billion acquisition of Avid Bioservices, a dedicated biologics contract development and manufacturing organization (CDMO) that generated $149.3 million in revenue in 2023. The all-cash transaction is expected to close in 2025 and will take Avid off the NASDAQ. It seems like CDMOs have been in high demand this year, benefitting from a variety of market tailwinds, especially the rising complexity of drug development. The acquisition of Avid was only the third-largest for a CDMO this year so far; ILC Dover, Inc. was acquired in a $2.325 billion deal in March, and Novo Holdings A/S purchased Catalent, Inc. For $16.5 billion, or 3.4x revenue its revenue in 2022.
The Hospital market was also quiet, with only five transactions, less than half of the 12 deals announced in October. The most notable deal was the acquisition of Summa Health by Health Assurance Transformation LLC for $485 million in cash. Summa Health is one of the largest integrated healthcare delivery systems in Ohio and encompasses a network of hospitals, community medical centers, a health plan, an accountable care organization, a multi-specialty physician organization, research and the Summa Health Foundation. According to the company’s annual report, it generated approximately $1.86 billion in total revenue in 2023, and according to the company’s 2023 financial audit, its EBITDA was approximately $22.6 million.
The purchase price of $485 million, when added to Summa Health’s current cash, will enable the health system to eliminate $850 million in existing debt.
Health Assurance Transformation was founded by General Catalyst in 2023 and focuses on acquiring and operating health systems nationwide.
We suspect the overall slowdown in the healthcare M&A market is connected to uncertainty, more than an increase in any specific headwinds. President-elect Trump’s healthcare platform lacks specifics, and extrapolating an agenda from his cabinet picks is easier said than done. For instance, the presidents-elect’s pick to run the Centers for Medicare and Medicaid Services (CMS), Dr. Mehmet Oz, is a licensed heart surgeon, but he’s also most known for his failed Senate run in Pennsylvania and his daytime television appearances. Additionally, he’s been criticized for “promoting products of questionable medical value” and “blurring the lines of advertising and medical advice.”
It’s a stark difference in choice from the president elect’s last pick to head CMS, Seema Verma, who had an extensive history in public health and management.
How Oz will run CMS, an agency with more than 6,000 employees and a $1.1 trillion budget, is anyone’s guess.
Overall, we expect a pro-business agenda with plenty of measures aimed at deregulation, but the exact roadmap is unclear. Investors are most likely in “wait-and-see” mode because there’s certainly a lot of change coming for the 2025 healthcare market.
