Financial buyers, which include real estate investment trusts and private equity firms, are not the dominant players in the health care M&A market. Their participation depends on many factors, with valuations being an important determinant, (see chart below).
Middle-market private equity firms, in particular, have had a hard time getting into and then winning auctions for health care entities in the past few years, as strategic buyers have outspent or even pre-empted auctions.
In the first quarter, financial buyers accounted for 15% of the deal volume, with 59 deals, which is slightly lower than the previous four quarters. The first quarter featured eight deals that topped the $1.0 billion mark, one of which was announced by a private equity firm.
Of the 59 deals announced by financial buyers in Q1:17, 37 were made by private equity firms and 22 were made by real estate investment trusts. REITs announced 20 deals in the Long-Term Care sector and two deals in the Hospital sector.
As usual, the targets were more varied for the private equity buyers. They included eHealth (eight deals), Long-Term Care (seven), Other Services (seven), and Physician Medical Groups (seven). The Home Health & Hospice sector had three deals. The Hospital and Laboratories/MRI & Dialysis sectors had two deals each. Behavioral Health Care and Pharmaceuticals each had one deal announced by a private equity firm.
Financial Buyers
| Q1:16 | Q2:16 | Q3:16 | Q4:16 | Q1:17 | |
| Deals announced | 69 | 94 | 67 | 60 | 59 |
| Share of deal volume | 18% | 22% | 18% | 16% | 15% |
| Dollars committed (in millions) |
$2,371 | $6,710 | $7,728 | $11,653 | $4,316 |
| Share of dollars spent | 3% | 8% | 16% | 31% | 7% |
Source: HealthCareMandA.com, April 2017
