Is Healthcare's M&A Trend Softening?

Several results from a recent HealthLeaders survey suggest that M&A activity levels may be on the verge of easing.

While the 2019 HealthLeaders Mergers, Acquisitions, and Partnerships Intelligence Report finds that most healthcare respondent organizations experienced positive impacts from their merger, acquisition, and partnership (M&A) activity, high levels for "don't know" responses and mediocre results for increasing quality outcomes leave the door open to an interesting question: Would respondents say their organization would choose to participate again in their most recent M&A activity?

Revealingly, two-thirds (66%) of respondents say that their organization would choose to participate again in its most recent M&A activity, a positive finding given the costs and complexity of such undertakings.

Note, however, that this result is down seven percentage points over last year's survey. In a similar vein, 16% of respondents—double last year's percentage—indicate that they would not choose to participate again.

These data points will be something to watch in subsequent surveys.

Case for softening growth
 

While the outlook for continued growth in M&A activity appears strong and the majority of survey data suggests several more years of growth, there are a handful of results that suggest that activity levels may be on the verge of easing.

One such example is the survey question that asks about the nature of respondents' most recent M&A activity. While the results show slightly increased activity in acquiring another organization (31%)—up five percentage points over last year—and slightly decreased activity for a contractual relationship, but not M&A (23%)—down six points, the most interesting result is for no activity.

Nearly one-quarter (23%) of respondents say that their organization has had no activity recently, almost double last year's result (12%). Whether this is an indication of some softening in the M&A trend is certainly subject to debate, particularly given the strong data from other questions in the survey related to M&A activity.

Another example of softening is the survey result for cumulative total dollar value of the M&A activity organizations will be exploring over the next three years. Respondents indicate that 55% of the cumulative total dollar value falls below $50 million, and 22% is $50 million and above.

Compared with last year's survey, there appears to be a shift toward lower cumulative total dollar value: the less-than-$50-million range is eight percentage points higher (55% versus 47%) than last year, and the $50 million and more range is eight points lower (22% versus 30%). Translation: respondent M&A budgets appear to be decreasing slightly.