Healthcare Merger and Acquisition Revenues Totaled $8.3B in Q3 2022

Healthcare merger and acquisition activity was low in the third quarter of 2022, with just ten transactions generating $8.3 billion in revenue, according to Kaufman Hall’s latest M&A Quarterly Activity Report.

Activity declined from Q2 when 13 transactions generated a record high of $19.2 billion.

However, the trends were consistent with merger and acquisition activity running below pre-pandemic levels. In addition, the number of transactions and revenue volumes were up compared to Q3 2021.

While Q3 2022 saw ten merger and acquisition deals, Q3 2021 saw seven. The average size of the smaller party in Q3 2022 transactions was $834 million, compared to $619 million in Q3 2021. In Q2 2022, the average size of the smaller party was nearly $1.5 billion.

Two of the ten transactions in Q3 2022 were considered mega transactions, meaning that the smaller entity’s annual revenues exceeded $1 billion. These transactions included Pure Health’s $500 million equity investment in Ardent Health Services and Prime Healthcare’s acquisition of nine hospitals and two medical office buildings from Medical Properties Trust, Inc.

The largest Q3 transaction was UChicago Medicine’s acquisition of a controlling interest in AdventHealth’s Great Lakes Region.

The total transacted revenue in Q3 2022 from mergers and acquisitions was $8.3 billion, marking an increase from the $5.2 billion recorded in Q3 2021. Notably, this revenue was higher than all Q3 revenues except for one over the last seven years.

In two of the transactions from Q3 2022, the acquirer was a for-profit health system. Four transactions consisted of academic/university-affiliated acquirers and there was a religiously affiliated acquirer in one transaction. The remaining three deals included not-for-profit health system acquirers.

The report highlighted the for-profit sector, as for-profit sellers have been involved in transactions that seek to rebalance portfolio holdings to concentrate on core assets and markets. This portfolio realignment strategy was prevalent in 2021 and continued in Q1 2022 when the share of transactions involving a for-profit seller reached an all-time high of 58 percent.

In Q3 2022, Community Health Systems (CHS) continued the trend of for-profit systems selling standalone assets when it announced plans to sell Greenbrier Valley Medical Center to Vandalia Health.

“Portfolio realignment and focused regional growth are among the trends we expect to continue, as hospitals and health systems focus on building depth and breadth of services within core markets,” Kaufman Hall researchers wrote. “We also anticipate continued growth in partnership models that can offer new sources of capital and new capabilities as organizations emerge from an extremely challenging financial year and refocus on strategic growth opportunities.”