Q1-2023 Market Update: Healthcare Services M&A Activity Set to Rebound Over Coming Months
Despite continued strains on capital markets and sustained industry-wide labor shortages, the healthcare services industry saw similar transaction volume as Q4 2022 with levels of capital deployed nearly surpassing the heights of Q3-2021. Setting a strong precedent for other consolidators this quarter was CVS Health (NYSE: CVS), which purchased Oak Street Health (NYSE: OSH) and Signify Health (NYSE: SGFY) for an aggregate value of $18.6B. The healthcare giant, once solely operating within the retail pharmacy space, is executing a unique growth strategy to establish itself as a completely vertically integrated healthcare operator to provide unmatched value-based care. While both acquisitions stand alone as outliers in Q1 in terms of total enterprise value, the deals solidify market and industry sentiment that there is significant value to be captured in the healthcare system’s transition to value-based care.
Several other factors, including industry-wide labor constraints, technological advancements, the rising cost of healthcare, and consistently increasing demand for services continue to drive industry consolidation. Acquisitive strategic groups and private equity firms remain optimistic that the added value of scale in a partnership can help alleviate the burdensome pressures of high inflation and labor shortages felt by providers nationwide since the onset of the pandemic.
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