United States - Healthcare - Quarterly Healthcare Transactions Review: Unveiling The Latest Industry Mergers And Acquisitions [Q1 2024] (2024)

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Ankura is pleased to present an overview of healthcaretransactions announced or closed during Q1 2024 in the UnitedStates. Total transactions decreased by 7.6% in the first quarterof 2024 after remaining relatively flat in the fourth quarter of2023. Excluding the Life Sciences and Medical Office Buildingssectors, the total number of transactions in the United Statesdecreased by 12.1%.

Notable Transactions Announced or Closed in Q1¹

• UCI Health entered into a definitive agreementto acquire four hospitals from Tenet Healthcare Corporation (NYSE:THC) on February 1, 2024, for $975.0 million, implying a1.0x trailing revenue multiple and 13.7xtrailing adjusted Earnings Before Interest, Taxes, Depreciation,and Amortization (EBITDA) multiple.
• Nuvance Health entered into a definitiveagreement to join Northwell Health on February 28,2024. After closing, the newly combined health system will consistof over 14,000 providers and over 1,000 sites of care, including 28hospitals.
• National Cancer Care Alliance entered into adefinitive merger agreement to merge with Quality CancerCare Alliance on February 29, 2024. The newly formedcompany, ONCare Alliance, will represent 33 independent practicesproviding oncology care.
• Waud Capital Partners acquired Senior Helpersfrom Advocate Health on March 21, 2024, marking Waud Capital'scontinued investment in the post-acute and home care space. SeniorHelpers provides home care and wellness offerings for seniors,operating more than 380 locations across the United States, Canada,and Australia.
• Boston Scientific (NYSE: BSX) entered into adefinitive agreement to acquire Axonics, Inc (NASDAQ: AXNX) onJanuary 8, 2024, for $3.6 billion, implying a 9.2x trailingrevenue multiple and 8.0x forward revenuemultiple. Axonics is a medical technology companydeveloping and commercializing products with a focus in the urologyspace.

Key Observations

The notable decrease in acquisition activity in the firstquarter of 2024 marks the lowest number of announced transactionsfor the healthcare industry since Q4 2020. Despite previousoptimism that healthcare transaction activity would rebound fromthe declines seen in 2023, the industry faced a slower start to theyear as a result of ongoing downward pressure, including continuedhigh interest rates and intensified regulatory scrutiny. Theincreased cost of borrowing associated with elevated interest ratescontinues to pose significant financial obstacles for marketparticipants and likely discourages some potential investors.Simultaneously, increased regulatory scrutiny has created a morecautious environment. In particular, private equity involvement inhealthcare acquisitions has received heightened attention from thegovernment and media alike.

As shown in the figures below, recent healthcare acquisitionscontinued to be dominated by three sectors: Physician MedicalGroups, Other Services ², and eHealth. Despite declinesin transaction activity in Q1, the Physician Medical Group sectorremained the most active sector in terms of total transactions as aresult of continued interest from health system and private equitybuyers alike, accounting for 25.2% of total deal volume. However,private equity involvement in healthcare transactions overalldeclined significantly, participating in only 136 announcedtransactions after averaging nearly 200 transactions each quarterover the past three years.

Despite broader declines in activity, certain sectors remainedrelatively active, including the hospital sector. In addition tothe merger between Nuvance Health and Northwell Health, TenetHealthcare closed the divestiture of ten hospitals through threeseparate transactions. The oncology space also remained active withseven announced transactions. In addition to the National CancerCare Alliance's merger with Quality Cancer Care Alliance,American Shared Hospital Services acquired three radiation centersin Rhode Island and a number of independent practices were acquiredby larger operators such as American Oncology Network andOneOncology.

Future Outlook

Moving forward in 2024, there are continued headwinds facingtransaction activity in the healthcare industry. Sustained highinflation figures have signaled to investors that any cuts tointerest rates could be delayed. Additionally, increased scrutinyfrom regulatory agencies could continue to dampen transactionactivity, particularly with private equity investments.

Footnotes

1. Sources: LevinPro HC Database, published by IrvingLevin Associates LLC; Capital IQ

2.The category "Other Services" includesreal estate, surgery center, urgent care, staffing and occupationalhealth sub-sections.

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