Thursday, March 23, 2023

Healthcare Merger and Acquisition Revenues Totaled $8.3B in Q3 2022

The total revenue from mergers and acquisitions in the healthcare industry for the third quarter of 2022 decreased from the second quarter’s $19.2 billion but increased from the third quarter of 2021’s $5.2 billion. According to Kaufman Hall’s most recent M&A Quarterly Activity Report, healthcare merger and acquisition activity was weak in the third quarter of 2022, with only 10 transactions producing $8.3 billion in revenue.

Activity decreased from the second quarter when 13 deals brought in a record-breaking $19.2 billion. However, the patterns pointed to merger and acquisition activity being lower than it was before the outbreak. Additionally, compared to Q3 2021, the number of transactions and revenue increased.

Ten merger and acquisition transactions occurred in Q3 2022 compared to seven in Q3 2021. In Q3 2022, the average transaction size for the smaller party was $834 million, up from $619 million in Q3 2021. The average size of the smaller party was close to $1.5 billion in Q2 2022.

In Q3 2022, there were 10 deals, two of which were mega transactions, indicating that the smaller entity’s yearly revenues were greater than $1 billion. These deals included Prime Healthcare buying nine hospitals and two medical office buildings from Medical Properties Trust, Inc., as well as Pure Health investing $500 million in stock in Ardent Health Services. The purchase of a majority stake in AdventHealth’s Great Lakes Region by UChicago Medicine represented the largest transaction in Q3.

Two of the transactions from Q3 2022 had a for-profit health system as the acquirer. One transaction had a religiously associated acquirer, while four transactions had academic/university-related acquirers. Acquirers of not-for-profit health systems were included in the final three transactions.

The for-profit sector was emphasized in the research because for-profit sellers have been involved in deals that aim to rebalance portfolio holdings and focus on key markets and assets. The percentage of deals involving a for-profit seller hit an all-time high of 58 percent in Q1 2022, continuing the portfolio realignment approach that was popular in 2021.