2023 Mergers & Acquisitions Focus On Healthcare

In recent years there has been a trend of increasing merger and acquisition activity in the healthcare industry. This trend will continue in 2023, with affiliations across state lines and standalone facilities joining larger established players. The healthcare industry is in a state of constant change and evolution.

The Market

Due to mixed signals through 2022, investors are struggling to predict future outcomes for the healthcare M&A sector. On the one hand, the industry saw a significant drop in M&A deals in 2022, as the number of these dropped from an average of 600 per quarter in 2021 to just 400 per quarter in 2022. On the other hand, several major, multibillion-dollar M&A deals took place in 2022.

Additionally, global issues, such as the ongoing labor shortage, supply chain disruptions, geopolitical turmoil and fluctuating inflation concerns, may spur an increase in the number of healthcare industry M&A transactions. For example, some healthcare companies may invest in acqui-hiring to help fight the labor shortage or acquire companies to overcome supply chain challenges.

Future Outcomes

When predicting future outcomes for healthcare M&A deals, it is a good idea to see how the 2022 year ended for the industry. We can learn a few noticeable trends from healthcare M&A activity during Q3 and Q4 2022. For example, we noticed several primary factors prompting healthcare industry M&A activity, such as:

• Consolidating for inorganic growth: Many companies invest in M&A deals to advance inorganic growth by expanding their customer base, increasing their employee talent pool and building investor confidence.

• Enhancing core operations: M&A deals, especially healthcare technology mergers and acquisitions, can help companies improve core operations and increase production while lowering operating costs.

• Buy and build strategies: Companies may also invest in M&A deals in an effort to expand their current operations. This buy-and-build strategy enables companies to expand into new geographical markets, enter an adjacent market or minimize supply chain disruptions.

• Disruptive innovation: Several recent major M&A deals allowed companies to enhance their business model by moving into new markets. For example, CVS’s recent purchase of Signify Health permits them to expand into the home healthcare sector.

Signs show that M&A deals will continue to take place throughout 2023. While the number of deals may not be as high as in 2021, major deals may be on the horizon. Since UnitedHealth successfully completed its deal to acquire Change Healthcare despite the government’s attempts to stop it, other larger healthcare companies may be encouraged to battle it out in court. This factor, in combination with other M&A activity we saw in Q3 and Q4 2022, could lead to more finalized healthcare mergers and acquisitions for 2023.

Further details: Mergers & Acquisitions Trends and Outlook for 2023