The volume of health contracts will remain at a record pace for 2021

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Although the transaction volume in September (213) fell slightly compared to the summer, the deals announced and concluded in the first three quarters of 2021 (2,156) already exceed the total volume for 2020 as a whole (1,936).

At the current pace, the volume of transactions will easily exceed 2,750 in 2021 – and likely exceed the 3,000 mark, as the large volume of ongoing transactions is slated to close before the end of the year for a variety of reasons, including uncertainty in future tax based on the current one Discussions in Congress as well as the desire to capture the current frothy reviews of the market.

In terms of the two leading sectors, Life Science and Pharma has already closed nearly 400 deals (and expected to exceed 500 by year-end), while Healthcare IT and Software have already exceeded 320 deals and are expected to end the year with around 450 deals.

Economic headwinds (e.g., ongoing supply chain challenges, higher inflation, and labor shortages) and ongoing uncertainty about whether Congress can pass an infrastructure bill or a democratically motivated reconciliation bill could dampen enthusiasm for investing in healthcare; However, we assume that the deal market will remain robust in the fourth quarter despite the economic and political headwinds.

Life Sciences and Pharmacy

Life Science and Pharma had the highest volume of deals announced or closed in September (47) and averaged 49 deals over the past three months, the most active quarter of the year. A persistently strong pipeline along with the recent announcements about the additional Covid-19 therapeutics, including oral antivirals and vaccine boosters, are likely to carry this momentum through the end of the year. On the flip side, investors will no doubt be watching what kind of prescription drug price control measures could emerge from the current discussions among Democrats in Congress.

Health IT and software

With nearly 30 deals in September, healthcare IT is well on the way to becoming the second most popular deal announced or closed in any industry this year. As the pandemic continues for the coming months, consumer demand for innovative remote care options and new innovative IT tools is likely to remain high, creating a new hybrid care system that meets both pre-pandemic and pandemic consumer needs.

Medical devices and consumables

The medical device and utilities sector has also seen nearly 300 transactions so far in 2021 and could hit 400 by the end of the year due to various factors including continued demand related to the distribution and delivery of Covid-19 vaccines.

Medical practices & services

The Medical Practice and Services sector recorded 36 completed or announced transactions in September and closed the third quarter with a total of 79 transactions. Interest in this sector continues, and with numerous doctor groups having deals in process that are expected to close by the end of the year, we expect this sector to top 400 deals this year.

Women’s Health had another active month with a total of five deals, underscored by several acquisitions by Webster Equity Partners following the company’s entry into the space with the acquisitions of California’s Santa Monica Fertility in late 2019 and Ohio-based Reproductive Gynecology & Infertility in August 2021 The company expanded its geographic reach in September, adding Dominion Fertility, based in Virginia, and the Institute for Human Reproduction, based in Illinois.

Ophthalmology transaction activity also remains robust, with nine transactions completed or announced during the month. Retina Consultants of America and US Eye were the most active buyers, closing two deals each during the month. Texas-based Retina Consultants of America continued its series of acquisitions in 2021, adding offices in New York and Tennessee, while Florida-based US Eye added groups in Virginia and North Carolina.

Home health and hospice

The home health and hospice sector has surpassed 100 transactions to date in the third quarter and could very well exceed 150 transactions by the end of the year due to continued and growing demand for affordable and convenient home health services.

Behavioral health

Behavioral Health had an active month in September with a total of 30 in the third and 99 so far in 2021 and could potentially close the year with over 150 deals due to the extensive activity in the pipeline. The sector has seen increased demand for services in recent years due to the growing recognition of its importance, a trend accelerated by Covid-19 and the mental health impact of the pandemic.

The largest transaction in the industry in September was the acquisition of Summit BHC by Patient Square Capital for $ 1.3 billion. The transaction is only the fourth for Patient Square, a newly formed private equity firm led by former KKR healthcare chief Jim Momtazee. Summit is a leading drug abuse treatment platform and mental health services based in Tennessee. The company grew rapidly after being sold to Lee Equity Partner and FFL Partners in 2017 after making seven acquisitions, opening five new facilities and expanding many of its existing facilities during the ownership of the companies. Today the practice has 24 locations in 16 states.

cannabis

The transaction volume of cannabis also remains robust, with over 200 years to the third quarter, almost doubling last year’s activity. It is quite possible that this sector could close the year with over 300 transactions.

While the concentration of business remains high in states like California and Colorado, which have legalized cannabis for years, activity continues in a variety of states that recently passed laws legalizing both medicinal and recreational marijuana .

Outlook for Q4 2021

For all of the reasons outlined above, we expect a super robust fourth quarter with a record number of deals in all leading sectors by closing in 2021 with around 3,000 total deals. This rapid pace of health deals is expected to continue well into 2022 as long as the economy does not suffer major disruptions.

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

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Gary W. Herschman is a member of Epstein Becker Green in his Newark, NJ 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 Senior and National Director of the Center for Healthcare Regulatory Insight at KPMG LLP in Washington, DC Carole Streicher is US Lead Partner, Deal Advisory and Strategy at KPMG LLP in Chicago

Ryan DeBlaey and Michael Stotz from FocalPoint partners; and KPMGs Ross White, Puja Ghelani and Shakoor Jilani contributed to this article.


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