More than one-third of hospital and health system transactions announced in the third quarter involved an entity that cited financial distress as a driving factor, according to a Kaufman Hall M&A report published Oct. 12.
Five details:
1. Eighteen transactions — representing $8.2 billion in total transacted revenue — were announced in the third quarter, according to the report. The 18 M&As announced in Q3 compares to seven in the Q3 2021 and 10 in Q3 2022.
2. M&A activity is picking up steam as hospitals, health systems and other providers seek partnerships to grow and ensure long-term sustainability.
3. Despite only one "mega merger" transaction — deals in which the smaller entity has more than $1 billion in annual revenue — third-quarter average seller size (or the smaller party) and total transacted revenue remain above historical levels, according to Kaufman Hall.
4. Nonprofit systems were the acquiring or larger party in 14 of the 18 M&As announced in Q3, with for-profit systems the acquiring entity in the other four. Of the 14 nonprofit systems, seven were academic organizations and one was a religious-affiliated system. The four transactions in which a for-profit system acted as acquirer focused primarily on financially distressed systems, according to the report.
5. In Q2 2023, 20 transactions were announced, up from 15 in Q1 2023. The 20 transactions were the highest number seen in a second quarter since there were 21 announced in 2018. It was also the highest number of transactions reported in a quarter since the first quarter of 2020, the beginning of the COVID-19 pandemic.
Click here for more details on the report.