Despite Pandemic, Healthcare M&A Activity Stays Apace

A Kaufman Hall analysis notes that the anticipated slowdown in healthcare M&As has not materialized.

Hospital volumes and revenues are slumping amid the coronavirus pandemic, but the public health emergency hasn’t slowed the pace of mergers and acquisitions, a new analysis shows.

"With 19 transactions announced in Q3, activity for the quarter was largely on par with historical third-quarter activity and was significantly above the 14 transactions announced in Q2 2020," an analysis released Tuesday by Kaufman Hall said.

The report noted that "four transformational transactions" in Q3 2020 "ties the highest number of transformational transactions that we have seen in a single calendar quarter," while the average size of seller by annual revenues was historically high, at just under $400 million.

Those transformational deals include the consolidation of: Cone Health and Sentara Healthcare in the Southeast; Lifespan and Care New England in Rhode Island; CommonSpirit and Virginia Mason in the Pacific Northwest; and Novant Health, UNC Health, and New Hanover Regional Medical Center in North Carolina.

In addition, several transactions that were announced before the pandemic continued unhindered in Q3, KaufmanHall said, including Northwest Community Healthcare's partnership with NorthShore University Health System in suburban Chicago, and Saint Peter's Healthcare System definitive agreement with Robert Wood Johnson Barnabas Health in New Jersey

Kaufman Hall analysis notes that the anticipated decline in healthcare M&As has not materialized, either in Q2 or Q3, and suggests that "the pandemic might strengthen the rationale for strategic partnerships, leading to a potential uptick in M&A activity as the industry continues with its repositioning."