Health IT, Software Deals Lead Industry Moves So Far in 2021

July 28, 2021, 8:01 AM

The volume of announced and closed health-care industry deals through the first half of 2021 (1,444) are up 73% over the same period last year (830). Similarly, the number of deals in June (283) and Q2 (721) both exceeded previous recorded volumes. At this current pace, deal volume for the 2021 calendar year is expected to exceed 3,000, which would surpass the volume for any other year on record.

With the economy continuing to grow, we anticipate that investment activity will continue at a similar pace. However, the recent surge in Covid-19 cases, driven by the Delta variant, could create some headwinds, and congressional action on various initiatives, such as prescription drug price controls, could impact certain sectors of the health-care industry.

Health-Care IT and Software

Health-care IT and software deals led all sectors with 50 announced or closed deals in June, the most of any month this year, and 225 transactions in the first half of 2021.

Although utilization of telehealth has been slowly declining for the past couple of months as patients return to traditional care settings, overall demand for innovative health IT remains higher than pre-pandemic levels as patients and providers continue to seek options to have care delivered in virtual environments or other contactless ways.

Some of this has been driven by the realization that there is “no going” back in some ways to the pre-Covid days in light of the possibility of more Covid cases from variants and other potential future pandemics, all of which have highlighted the need for providers and patients to be facile with the utilization of health IT products and platforms.

Some notable health IT transactions include the acquisition of PsyInnovations Inc., a provider of a platform for digital mental health solutions, by DarioHealth Corp., and the acquisition of Steady Health Inc., a fully integrated diabetes platform that uses data from continuous glucose monitoring devices to provide personalized medical care, by Carbon Health.

Physician Practices & Services

Physician practices and services saw 26 deals closed or announced in June, up from 16 in June 2020. The sector finished with 80 deals for the quarter, with nearly 200 physician group transactions in the first half of 2021.

We expect over 400 (and maybe close to 500) total physician deals in 2021 for three main reasons:

  • the desire of many physicians to “monetize” the value of their practice towards the height of the market, and before any proposed increase in long-term capital gains tax rates may take effect;
  • in light of the pandemic, desire to be part of join larger organizations with more professional corporate infrastructure and access to capital for expansion; and
  • uncertainty in the future of Medicare and commercial payor reimbursement for physician services.

In particular, a flurry of four deals were completed in the June by Gastro Health. The acquired gastroenterology practices are based in Northern Virginia and will help the Miami-based company continue to expand its footprint in the Mid-Atlantic region. The deals were closed following Gastro Health itself changing ownership earlier this year, with OMERS Private Equity purchasing the company from its former financial sponsor, Audax Group, and pursuing an aggressive ongoing M&A strategy.

Further, there continues to be an impressive uptick in orthopedic group transactions, as well as substantial continued activity in primary care and urgent care deals.

Hospitals/Health Systems

Twelve hospital and health system transactions were announced or closed in June, highlighted by the announcement of the planned merger of Spectrum Health and Beaumont Health, two of the largest health systems in Michigan. The combined entity would be the largest in the state with nearly $13B in revenues across 22 hospitals, 305 outpatient locations, and over 64,000 employees.

Deals of this scale are expected to accelerate in coming months as the Biden administration works to enact and enforce stricter antitrust laws, particularly within the health-care industry. An executive order signed in early July is intended to promote competition and slow consolidation in health-care and other key industries, and could accelerate near-term transaction activity within the hospital sector.

Life Science and Pharmaceuticals

Life science and pharmaceutical had the second highest volume of announced or closed deals in June (45) and is on pace for nearly 500 transactions by the end of the year. Investment interest in the sector is expected to remain high, although this could shift fundamentally, as details on the severity and likelihood of price control measures emerge from Congress over the coming weeks.

Medical Device and Supplies

Medical device and supplies had 39 announced/closed deals in June and 190 through the first half of 2021. The sector will continue to play an important role in continuing recovery from the pandemic, as well as supporting those areas of the country that are experiencing surges in cases.


Finally, the 34 cannabis transactions also hit a monthly record for this sector, which is skyrocketing around the country, as a majority of states now allow for medical marijuana and/or recreational use. The 140 deals in the first half of 2021 are almost double that of 2020 (73), and will likely reach close to 300 transactions by year-end. Activity is driven in part by the value of the industry, with Q2 2021 marking the second quarter in a row that sales across both medicinal and recreational cannabis surpassed $5 billion.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Write for Us: Author Guidelines

Author Information

Gary W. Herschman is a member of Epstein Becker Green in its Newark, N.J., office. Anjana D. Patel is a member of Epstein Becker Green in Newark. Zachary S. Taylor is an associate at Epstein Becker Green in Newark. Hector M. Torres is managing director at FocalPoint Partners LLC in Chicago. Larry Kocot is a principal and national leader, Center for Healthcare Regulatory Insight at KPMG LLP in Washington, D.C. Carole Streicher is U.S. lead partner, deal advisory and strategy at KPMG LLP in Chicago.

Ryan DeBlaey and Michael Stotz of FocalPoint Partners; and KPMG’s Ross White, Puja Ghelani, and Shakoor Jilani contributed to this article.

To read more articles log in.

Learn more about a Bloomberg Law subscription.