Healthcare M&A Activity in Q3 Stabilizes
Market tailwinds drive investments in healthcare tech
Despite all the headwinds straining the healthcare M&A market, deal activity stabilized in the third quarter of 2024, according to preliminary results in the LevinPro HC database. With 489 deals on the books in the last week of September, we saw only a marginal decline in activity compared with the second quarter of 2024 and year-over-year numbers. From April to June, there were 499 deals, and in Q3:23, activity reached 516 deals.
Disclosed spending followed a similar trend to quarterly deal volumes, which is not always the case. Announced prices hit approximately $44 billion in Q3:24, a 7% decline compared to the second quarter ($47.4 billion) but a 7% year-over-year increase ($41.01 billion). Naturally, the technology sectors accounted for the bulk of the spending, or 62% ($27.01 billion) of the third quarter’s total.
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Cardiology M&A Activity Cools Off in 2024
PE investments still drive consolidation in the space
Contrary to last year's industry predictions, the cardiology space within the Physician Medical Group (PMG) sector has not seen a high deal volume and most likely will not exceed the volume of prior years. Between January 1, 2024, and September 13, 2024, there have been 10 cardiology transactions reported. Compared to the same time frame of 2023, where 24 cardiology acquisitions were announced, 2024 is on a downward trajectory. Cardiology accounts for less than 3% of the 357 PMG transactions announced through September 13, 2024.
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Yet, while this decline may seem concerning, cardiology’s M&A volume for 2024 mirrors historical trends, with the high volume in 2023 (30 deals in total) being an outlier due to an increase in roll-up acquisitions...
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Spending partly remained healthy because of a surge of activity in sectors like Hospitals and Physician Medical Groups, which saw some large deals in the third quarter. In August, Tenet Healthcare sold a 70% stake in Brookwood Baptist Health to Orlando Health for $910 million in cash, implying a total value of $1.3 billion; in September, McKesson Corporation purchased Core Ventures, a Florida-based management services organization for physician groups, for $2.49 billion.
If we annualize the first three quarters of 2024, volume is expected to hit approximately 2,000 transactions, which is still less than the 2,197 deals announced in 2023. On the one hand, the Federal Reserve did finally cut interest rates in mid-September, lowering the target range by 0.5% to 4.75% to 5%, with many media outlets suspecting another rate cut in November as inflation continues to slow. Interest rates have been a real headache for dealmakers, and this cut should bring some relief and drive deal closings.
However, the United States is also caught up in the final stretch of a presidential election, which drives a lot of uncertainty in the market and beyond, and nothing spooks investors and dealmakers more than uncertainty. Typically, it would be an interesting experiment to compare numbers from the last presidential election to see how the market fared, but the 332 deals announced in the third quarter of 2020 could reflect any number of chaotic variables we were dealing with that year.
Most of the deals, or 73%, targeted healthcare service providers, such as physician groups or home health agencies. Overall, healthcare services M&A volume dropped by 3% compared with the second quarter and 6% compared with the same time in 2023. The hospital market saw a notable increase, with 21 deals on the books, up from 16 in the second quarter. There were several deals for hospital chains in India and Southeast Asia, but in the United States, a lot of activity results from divestments by health systems, such as Ascension, Community Health Systems and Tenet Healthcare
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In the third quarter, a diverse mix of investors participated in the healthcare M&A market. Private equity firms and their portfolio companies accounted for approximately 34% of deals, or 168 transactions.
Private equity buyers are very active in the healthcare services market, but in the third quarter, 25% of private equity deals were for digital health, medical devices and other life science companies. Clayton Dubilier & Rice and TowerBrook Capital Partners, LP, two private equity firms, acquired R1 RCM Inc., a revenue cycle management provider, for $8.9 billion. In another deal, CVC Capital Partners, a Luxembourg-based private equity firm, acquired the Therakos platform, which is used to treat a range of immune-related diseases, from Mallinckrodt plc for $925 million.
The uptick in deal activity for private equity in healthcare technology sectors can be explained by a few factors. Some are the headwinds on the services side...
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Deal Summaries: Services Hospitals
Island Hospital Sdn. Private IHH Healthcare Berhad
Penang, Malaysia Kuala Lumpur, Malaysia
IHH 9/4/2024
In Brief: Based in Penang, Malaysia and founded in 1996, Island Hospital is a 600-bed hospital and one of the leading tertiary care providers in Malaysia.
Jaypee Healthcare
Uttar Pradesh, India New Delhi, India
In Brief: Jaypee Healthcare owns and operates two hospitals: the 500-bed Jaypee Hospital in Noida and the 200-bed Jaypee Hospital in Bulandshahr. The company also owns a 100-bed hospital in Anoopshahar, which is not currently operational.
Big South Fork Medical Center Private FOXO Technologies
9/17/2024 $20,000,000 Oneida, TN Minneapolis, MN FOXO
In Brief: Big South Fork Medical Center is a 25-bed hospital licensed by the state of Tennessee. It offers healthcare services for Oneida and the surrounding areas. The hospital is also known as Scott County Community Hospital, Inc.
5 long-term acute care hospitals Private Ventas, Inc.
N/A Chicago, IL
In Brief: Kindred Healthcare, LLC is selling five long-term acute care (LTAC) hospitals. The locations and details have not been disclosed. The deal is part of a larger agreement between Kindred and Ventas to amend leases for 23 LTAC hospitals whose leases were scheduled to mature on April 30, 2025. The lease maturities were extended by five years, and the base rent was increased.
Deal Summaries: Services Laboratories, MRI and Dialysis
Sydney, Australia
In Brief: Lumus Imaging is a Sydney, Australia-based diagnostic imaging company. It is made up of a team of radiographers, sonographers, nuclear medicine technologists and nurses. It has more than 2,000 diagnostic imaging experts and support staff across 135 sites in Australia.
Deal Summaries: Services
Toronto, Ontario Tampa, FL
Other Services
In Brief: SRx Health operates one of the largest specialty pharmacy networks in Canada with 35 specialty pharmacy locations, 40 specialty health/infusion clinics, four clinical trial sites and two wholesale distribution facilities.
8 HC Realty Trust properties N/A Joint venture N/A 9/4/2024 $193,000,000 N/A N/A
In Brief: Healthcare Realty Trust is selling eight of its healthcare real estate properties to a joint venture between Nuveen Real Estate. Nothing else about the properties was disclosed. The 80/20 joint venture, now valued at over $600 million, received financing for 40% of its contribution value.
Deal Summaries: Services
Naperville, Illinois MOB
MCB Science + Health
9/9/2024
$28,000,000 Naperville, IL Chicago, IL
In Brief: The acquired asset is a 72,468-square-foot medical outpatient building located in Naperville, Illinois. Naperville-based DynaCom Management developed the four-story building in 2015 and leased up 96% of its space. Endeavor Health, Illinois' third-largest health system, occupies almost half of the property. The property sold for $386 per square foot.
277-property portfolio N/A Scioto Properties, LLC
$80,000,000 N/A Powell, OH
In Brief: The acquired assets include 277 healthcare properties across 17 states.
Euroonco
Don Agro International
GRQ 9/14/2024 $33,649,000 Moscow, Russia Singapore, Singapore
In Brief: Euroonco is a private specialized oncological clinic in Russia, operating since 2011 in Moscow.
1 biomanufacturing facility
United Therapeutics Corp.
9/17/2024 $33,000,000 Durham, NC Silver Spring, MD UTHR
In Brief: The acquired asset is a 95,000-square-foot biomanufacturing facility in Durham, North Carolina. The facility sold for $347.37 per square foot. Oxford Properties acquired the site in late 2021 as part of a larger deal totaling $158.6 million.
Deal Summaries: Services Other Services
Serán Bioscience N/A Bain Capital Life Sciences Private 9/17/2024
$200,000,000 Bend, OR Boston, MA
In Brief: Serán Bioscience is a Bend, Oregon-based contract development and manufacturing organization providing a comprehensive suite of development, analytical and manufacturing services to pharmaceutical and biotechnology companies. Serán utilizes a foundation of physics, chemistry, materials science and advanced engineering to design robust formulations and engineered solutions.
RLS Private Telix Pharmaceuticals ASX: TLX 9/23/2024
$230,000,000 Miramar, FL North Melbourne, Australia
In Brief: RLS is America’s only Joint Commission-accredited radiopharmacy network, with 31 radiopharmacies covering more than 85% of the population. RLS’ revenue for FY 2023 was $158 million, according to the original deal press release from September 23, 2024.
Deal Summaries: Technology
Semnur Pharmaceuticals, Inc. Private Denali Capital Acquisition
Biotechnology & Pharmaceuticals
DECA 9/3/2024
$2,500,000,000 Mountain View, CA New York, NY
In Brief: Semnur Pharmaceuticals, a wholly owned subsidiary of Scilex Holding Company, is a specialty pharmaceutical company focused on the development and commercialization of novel non-opioid pain therapies.
Medera Private Keen Vision Acquisition NASDAQ: 9/5/2024
$622,600,000 Boston, MA Summit, NJ
KVACW
In Brief: Medera is a clinical-stage biopharmaceutical company focused on eradicating difficult-to-treat cardiovascular diseases with significant unmet needs, using a range of next-generation gene- and cell-based approaches in combination with bioengineered humanbased technology (including mini-Heart®) platform. Medera operates via two business units Sardocor and Novoheart.
AlphaMedix N/A Sanofi
NASDAQ: SNY 9/12/2024
$110,000,000 N/A Paris, France
In Brief: The acquired asset is AlphaMedix, a neuroendocrine tumor treatment that is nearing a filing for approval. AlphaMedix is designed to deliver a payload to cells that express somatostatin, a receptor found in most neuroendocrine tumors.
Dermavant Sciences Private Organon & Co.
NYSE: OGN 9/18/2024
$175,000,000 Durham, NC Jersey City, NJ
In Brief: Dermavant Sciences, a subsidiary of Roivant Sciences, is a biopharmaceutical company dedicated to developing and commercializing innovative therapeutics in immuno-dermatology.
Deal Summaries: Technology Biotechnology & Pharmaceuticals
GeBBS Healthcare Solutions Private EQT AB
OTCMKTS: 9/5/2024
$870,000,000 Culver City, CA Stockholm, Sweden EQBBF
In Brief: GeBBS Healthcare Solutions provides revenue cycle management solutions for the healthcare industry.
