Healthcare deals are at a rapid pace in 2021, with specific measures in the area of home health and hospice rooms.
And while private equity firm transactions are being driven with plenty of dry powder, they are also being driven by regulatory changes, emerging utility models, and the transformation of the sector. a new dealmaking report mid-year by PricewaterhouseCoopers (PwC) reveals.
“The progress of the pandemic means dealmakers are back to focusing on gaining competitive advantage,” Nick Donkar, PwC’s US healthcare deal leader, wrote in the report. “We see investors broaden their capabilities and rethink ecosystems, with a clear focus on value and patient focus.”
With at least 352 deals in healthcare, Q4 2020 saw the highest quarterly deal volume ever, according to PwC. That record didn’t last long as there were at least 426 transactions in the first quarter of 2021.
In the twelve months ending May 15 this year, there were at least 1,304 health contracts. Of this, at least 95 were accounted for by home sickness and hospice assets, an increase of 16% over the same 12-month period last year.
While that volume is certainly impressive, home health and hospice stand out more in terms of deal value.
The nursing and medical group sub-sectors recorded at least 330 and 285 qualifications, respectively, in the twelve months up to mid-May. Taken together, the more than 600 individual transactions reached a value of 11.8 billion US dollars, according to PwC.
The 95 home nursing and hospice deals – a far smaller sum – were also valued at $ 11.8 billion.
“The EV / EBITDA multiples have fallen slightly in only three subsectors: Managed Care; Laboratories, imaging and pharmacy; and outpatient care, rehabilitation and dentistry, ”described the PwC report. “At the [26.2 times], the multiple of home health and hospice is still by far the highest in the industry. “
In comparison, the Sector Average Company Value to EBITDA for the 12 months ended May 15 was 16.1 times.
There are several reasons why the home health and hospice subsectors have the highest multiples in the entire health care system.
First of all, it seems everyone – from sports facility companies, health systems and insurers – is actively trying to “own the home”. This trend began long before the COVID-19 pandemic, with most viewing home care as an essential tool in reducing US health care spending.
Since the pandemic, the federal government has also started to support home care as an alternative to inpatient care.
Major deals in home health made in the 12 months leading up to the 15th WCAS) for a “All-in” financial commitment of around $ 7.1 billion. Humana was announced in April and expects the deal to close sometime in the third quarter.
The takeover of the Simplura Health Group by ModivCare Inc. (Nasdaq: MODV) was also within this window. The transaction, announced in September and closed in November, brought Simplura, formerly owned by One Equity Partners, an enterprise value of $ 575 million.
“We bought something that had a certain materiality,” said ModivCare CEO Daniel Greenleaf recently said Home Health Care News. “We didn’t want to start a $ 10 million company, then another $ 10 million company. We really wanted to get into this business big. “
Aside from mere acquisitions, there was a fair share of both traditional and SPAC-powered healthcare IPOs in early 2021, according to the PwC report.
Home care-related IPOs include Aveanna Healthcare Holdings Inc. (Nasdaq: AVAH) and InnovAge (Nasdaq: INNV).
“Looking ahead, given recent activity, we expect continued interest in the public markets,” said PwC. “For years there were no pure IPOs in the healthcare sector, but by 2021 there were already four. This count excludes SPAC-backed IPOs, of which there were at least 10 in the 12 months ended May 15th. “
In reality, it’s not just the healthcare deal that is hotly coveted in 2021.
From 2016 to 2020, the annual US deal value averaged $ 1.8 trillion per year. By May 2021, the transaction was already worth $ 1.4 trillion. according to PwC.