Health-Care Mergers Up Over Last Year, Board Advisers Say
March 3 — The volume of mergers and acquisitions in the health-care industry is up compared with 2015, which was a very strong year for transactions, according to industry insiders.
Consolidations among health-care providers are up 66 percent over this point last year, and “overall everyone else in health care is gaining in scale,” Mike Condron, a managing director in the Chicago office of Newport Board Group which advises directors of health-care companies, said March 3 during a webcast sponsored by ECG Management Consultants.
According to data from Bloomberg Law: Corporate Transaction's Deal Analytics, the largest U.S. deals in the sector announced so far this month are Hong Kong-based Samsonite International SA's planned purchase of Tumi Holdings Inc. of New Jersey for $1.36 billion, and California-based McKesson Corp.'s pending acquisition of Rexall Drug Stores Ltd. for $2.23 billion.
“This is a trend that will continue over the next five to 10 years because fundamentally, the economics of the health-care industry are changing,” Rick Williams, chairman of PointCare Technologies Inc. and an adviser to other health-care boards, said during the webcast.
Commentators have predicted that health-care deal activity will be high this year.
Advances in technology that make managing larger companies easier and regulations under the Affordable Care Act continue to influence M&A activity. Low lending costs also are fueling the furious pace.
Samuel R. Maizal, a partner in the Los Angeles office of Dentons who focuses on restructuring, insolvency and bankruptcy, said at the webcast that he was surprised by the increase over 2015, especially given the uncertainty created by the presidential election.
Many consolidations in the sector involve small physician offices and local, rural standalone hospitals that may not be able to survive in the changing economy without merger with a larger institution, he said.
The pressures on the boards of these smaller companies are “incredible,” Maizal continued. “As the business becomes more and more complicated, more regulated, with more technological requirements, it is hard to attract the right type of directors at rural, nonprofit hospitals.”