Health-Care Deals Steady, Strong Through First Third of 2019

May 21, 2019, 9:45 AM

Consistency is the name of the game for health-care industry transactions in 2019 so far.

January started with an explosive 111 deals announced and/or closed, but activity has leveled off in the following months. There were 83 deals announced or closed in April, as opposed to 85 each in February and March, according to a list compiled for Bloomberg Law by investment bankers ECG Management Consultants and Provident Healthcare Partners LLC.

The slight dip was expected, as January often sees heightened activity involving deals put together during the prior year. It also isn’t concerning because 2019’s overall deal volume should exceed 2018 levels, Gary W. Herschman, a member of Epstein Becker & Green in Newark, N.J., told Bloomberg Law.

And the second half of the year should be stronger than the first half, Herschman predicted.

Hospital/Health System Sector

The hospital and health system sector could be the exception, Hector M. Torres told Bloomberg Law.

Transaction activity in this group “decreased significantly from the first quarter,” down to five in April from the first quarter average of 15, Torres said. Torres is a principal at ECG in Chicago.

Still, two fairly large hospital deals made news in April, ECG senior manager Aaron T. Newman told Bloomberg Law.

Health Quest and Western Connecticut Health Network completed their merger, creating a seven-hospital network in New York and Connecticut to be known as Nuvance Health.

And Atrium Health is exploring a merger with Wake Forest Baptist Health, a regional health-care system based in Winston-Salem, N.C., Newman said. The deal would combine 49 hospitals and create a new facility in Charlotte, N.C., he said.

In addition, “many hospitals outside major metropolitan regions—throughout ‘middle America'—are just now seriously exploring their strategic options for future survival and success,” Herschman said.

Long-Term Care

The long-term care sector remains the leader of the pack as far as deal volume goes.

That trend will continue throughout 2019 and beyond, as baby boomers age and the demand rises for both facilities-based and in-home-based care, Herschman said.

Texas and Louisiana were the hottest geographic markets in April, ECG’s Nicholas Davis told Bloomberg Law.

A joint venture among BlueMountain Capital Management, BM Eagle Holdings, and Capital Funding Group acquired a portfolio of 28 skilled nursing facilities located throughout those states from Sabra Health real estate investment trust for $282.5 million, he said.

Physician Practices

Meanwhile, the list of health-care specialties being courted by experienced investor-driven platforms keeps expanding, Herschman said.

Ophthalmology, dermatology, orthopedics, gastroenterology, radiology, urology, obstetrics and gynecology, vein surgery, and primary care all are being considered as good consolidation candidates, he said.

Dermatology deals, in particular, are picking up, Provident’s Jon Brown told Bloomberg Law. “Strategic consolidators are diligently searching for sizable independent practices to expand their market presence,” he said.

Other Sectors

Increased consolidation activity can be seen in the behavioral health sector too, Provident’s Kyle Daly told Bloomberg Law.

That’s expected to continue throughout 2019, as an increased appreciation and understanding of behavioral health issues, a growing patient population, and a favorable reimbursement environment are pushing mergers and acquisitions in this sector, he said.

The health-care staffing sector also was active in April, Provident’s Joseph Wisniewski told Bloomberg Law. New platform investments and add-ons could be seen in the nursing, therapist, managed services, life sciences, and temporary physician subsectors, he said.

Bloomberg Law’s Health Care Transactions Editorial Committee contributed editorial guidance for this report. Members include Gary W. Herschman, of Epstein, Becker & Green PC, Newark, N.J (gherschman@ebglaw.com); Paul D. Gilbert, of Epstein, Becker & Green PC, Nashville (pgilbert@ebglaw.com); Yulian Shtern, of Epstein, Becker & Green PC, Newark (yshtern@ebglaw.com); Jonathan Brown, of Provident Healthcare Partners LLC, Boston (jbrown@providenthp.com); Kyle Daly, of Provident Healthcare Partners LLC, Boston (kdaly@providenthp.com); Hector M. Torres, of ECG Management Consultants, Chicago (hmtorres@ecgmc.com); Aaron T. Newman, of ECG Management Consultants, Chicago (atnewman@ecgmc.com); and Nicholas B. Davis, of ECG Management Consultants, Chicago (nbdavis@ecgmc.com).

Epstein, Becker & Green PC did not comment on any particular transaction or party discussed or listed in this article.

To contact the reporter on this story: Mary Anne Pazanowski in Washington at mpazanowski@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Brent Bierman at bbierman@bloomberglaw.com

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