The Covid-19 pandemic resulted in major merger and acquisition agreements between vendors, as evidenced by the transactions that dominated the landscape in early 2021.
Although the number of vendor transactions declined in the first quarter of this year, the average size of these transactions was significantly higher than in the same period last year, according to a new report from health consultancy Kaufman Hall.
13 transactions were announced in the first quarter of 2021, which is well below the most recent historical averages. The number of “mega” transactions – that is, transactions in which the smaller partner or seller has average annual sales of more than $ 1 billion and transactions with seller sales between $ 500 and $ 1 billion – was higher than that Report shows.
The average seller size by sales was $ 676 million. This is the third highest quarterly number for average salesperson size for Kaufman Hall over the past 10 years. The highest value was over $ 800 million in the second quarter of 2020 and the second highest was over $ 700 million in the fourth quarter of 2016. The number is up significantly from Q1 2020 when the average seller size by revenue was just $ 172 million.
In addition, a large number of hospital facilities, 72 in total, were included in the announced transactions.
Some of the key transactions of the first quarter of 2021 were the UK HealthCare and King’s Daughters Health System joint venture partnership to expand access to tertiary level services and OU Medicine, the plans to merge with the University of Oklahoma College of Medicine to create a fully integrated academic sector, health system.
Total transaction revenue in the first quarter of this year was $ 8.8 billion – the second highest in five years after the first quarter of 2018, when transaction revenue exceeded $ 12 billion.
According to the report, there are two key drivers behind the merger and acquisition activity in the first few months of 2021. The first is that due to the Covid-19 pandemic, health organizations are seeing greater value in diversification across both markets and sources of income.
The second is the significant local market knowledge that smaller healthcare facilities have. While these institutions may not be on the financial scale of larger systems, understanding local issues can be beneficial and fuel growth.
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