Health-care deal-making was off to a hot start in January, with 274 reported deals announced or closed, but momentum could be affected by the outbreak of war in Ukraine.
The January number got a boost from tax considerations that pushed the closing date of some deals from December into the new year, according to
The top sectors last month were those that have been the focus of health-care investment and consolidation for the past two years: life sciences (46 deals), physician services (44), health-care IT (39), medical devices (39), behavioral health (15), cannabis (13), and home health (11).
Expectations are high that mergers and acquisitions in 2022 could match or exceed last year’s record pace, which saw over 3,000 transactions, Herschman said. The number of deals in December 2021 was 303, up from 236 in November.
“Larger organizations, with experienced executives and greater capital, are more effective than smaller organizations at navigating through industry and regulatory changes, including the ongoing transformation to value-based care and direct contracting,” he said. They’re also better positioned to “benefit via economies of scale and bulk purchasing.”
But international unrest from the events unfolding in the Ukraine, along with continuing supply chain issues, labor shortages, inflation, and possible interest rate increases, are creating headwinds that could slow the trend, he said.
KPMG in Washington and FocalPoint Partners of Chicago prepared the curated year-to-date list and list of select January transactions for Bloomberg Law.
Life Sciences, Physician Practices
The life sciences and pharmaceuticals sector saw 46 deals in January, about the same as the average monthly figure for 2021, according to Larry Kocot of KPMG in Washington.
“Sector investment is expected to remain strong as the federal government continues to invest in additional Covid-19 vaccines and treatments,” he said.
Physician practices and services also started the year well with 44 deals closed or announced in January, according to Hector Torres of FocalPoint Partners in Chicago.
Several sub-sectors continued their momentum from the previous year, including eye care, orthopedics, fertility, dermatology, and digestive health, Torres said.
The eye-care sub-sector saw 10 deals, a blistering pace, with three buyers making multiple acquisitions. These included Vision Innovation Partners, which expanded its presence in the mid-Atlantic region, EyeCare Partners, which completed acquisitions in Kentucky and Kansas, and Atlantic Vision Partners, which added two clinics in Virginia.
Consolidation in the fertility sector continued in the West with deals announced by San Diego Fertility Center and Ivy Fertility, backed by InTandem Capital Partners. They acquired Pacific Northwest Fertility in Seattle and Nevada Fertility Center in Las Vegas, expanding their presence outside California, Torres said.
Health IT
Health-care IT & Software continued to be a key area of focus for both strategic and financial acquirers, with 39 transactions announced or closed in January, up slightly from 38 in January 2021, Torres said.
Of note was Francisco Partners’ acquisition of IBM’s Watson Health business, which is expected to close in the second quarter of 2022 if approved by regulators. While financial terms weren’t disclosed, the rumored price tag is over $1 billion. “The transaction represents IBM’s exit from its health-care operations after obstacles plagued the company’s efforts in the space,” he said.
Despite over $4 billion in acquisitions to grow the division that launched in 2015, the company proved unable to turn a profit, Torres said. “Francisco Partners will acquire extensive health-care technology assets developed by IBM over the years and attempt to find profitability in the division’s datasets and analytical tools,” he said. “The firm hopes that enhanced focus and investment combined with its digital health expertise will rejuvenate the platform.”
The 39 transactions in the medical device and supplies sector were also above the pace set in 2021, which saw an average of 31 transactions per month, and just above the 37 deals in January of 2021, according to Kocot. Investors will likely be looking for some renewed activity in the sector as Covid-19 case numbers drop, relieving pressure on the health-care system, he said.
“Greater hospital capacity should translate to an increase in elective and other procedures that were delayed during the pandemic,” he said. “At the same time, the sector will continue to power testing, diagnostics, and other pandemic preparedness measures.”
Behavioral Health
The number of behavioral health deals continued its upward trend in January as investors of all types looked to expand their footprint in this space, said Anjana Patel of Epstein Becker & Green. Examples include AtlantiCare Health Services Inc., a New Jersey-based health system, which agreed to acquire John Brooks Recovery Center, a treatment provider for those with substance use disorders, in Pleasantville, N.J.
Other notable deals were Behavioral Health Group Inc.’s acquisition of the Center for Behavioral Health Idaho Inc., an operator of substance use disorder treatment centers, and The Stepping Stones Group LLC’s acquisition of The Southcoast Autism Center, a provider of behavioral therapy to autism patients, based in Fairhaven, Mass.
The cannabis sector saw 13 transactions in January, the 13th consecutive month of double-digit deal volume, said Timothy McHale of Epstein Becker & Green.
“The continued activity highlights the value of the industry, as sales of both medicinal and recreational cannabis continued to surge,” he said.
Total sales volume for the industry was over $37 billion in 2021, he said.
Epstein Becker & Green and KPMG didn’t comment on any particular transaction or party discussed or listed in this article.
Bloomberg Law’s Health Care Transactions Editorial Committee contributed guidance for this report. Members include Gary W. Herschman, of Epstein, Becker & Green PC, Newark, N.J. (gherschman@ebglaw.com); Anjana D. Patel, of Epstein Becker & Green PC, Newark, N.J. (adpatel@ebglaw.com); Timothy C. McHale, of Epstein Becker & Green PC, Newark, N.J. (tmchale@ebglaw.com); Larry Kocot, of KPMG, Washington (lkocot@kpmg.com); Carole Streicher, of KPMG, Chicago (cstreicher@kpmg.com); Ross White, of KPMG, Washington (rosswhite@kpmg.com); Hector M. Torres, of FocalPoint Partners, Chicago (htorres@focalpointllc.com); Jordan Coley, of FocalPoint Partners, Chicago (jcoley@focalpointllc.com); Ryan DeBlaey, of FocalPoint Partners, Los Angeles (rdeblaey@focalpointllc.com); and Michael Stotz, of FocalPoint Partners, Chicago (mstotz@focalpointllc.com).
To contact the reporter on this story:
To contact the editors responsible for this story:
Learn more about Bloomberg Law or Log In to keep reading:
See Breaking News in Context
Bloomberg Law provides trusted coverage of current events enhanced with legal analysis.
Already a subscriber?
Log in to keep reading or access research tools and resources.