Healthcare M&A update: H1 2022

U.S. markets cooled off during the first half of 2022

Declines are happening across all major indexes. This is driven by increased interest rates from the Federal Reserve to combat record inflation, as well as macroeconomic pressures brought on by the war in Ukraine and continued supply chain disruptions throughout multiple U.S. industries.

As most healthcare sectors shifted downward in the first half of 2022, managed healthcare outperformed the S&P 500, showing a positive return of 17% during the period. This is largely attributable to the ability of insurance policy providers to manage margins during inflationary periods by continually renegotiating contract pricing with policy holders.

Healthcare providers’ relative market performance

Source: S&P Capital IQ
LTM as of June 30, 2022
EV = Enterprise Value

M&A overview

There were 713 reported M&A transactions that closed during H1 2022, down from the 923 transactions during H2 2021. Reported closed healthcare transactions in H1 2022 decreased 18% compared to 872 closed deals for the same period in 2021.

The aggregate value of M&A deals also decreased from $213.1 billion in H2 2021 to $93.7 billion in H1 2022. This was driven by:

• A decrease in both average deal size and deal volumes
• A significantly lower number of deals had reported transaction values during the period

However, we can note a largest acquisition in the first half of 2022: Cerner Corporation, Inc. bought for $30.2 billion by Oracle Corporations’.

Quarterly U.S. healthcare M&A activity for transactions closed
Aggregate transaction value and number of deals.

Source: S&P Capital IQ - 16 revenue multiples reported in 1Q 2022; 18 revenue multiples reported in 2Q 2022

M&A healthcare activity poised for comeback

With the help of economic stimulus from the federal government, the long-term healthcare industry is poised to continue its strong recovery in the second half of 2022. Research shows:

• After experiencing record low occupancy levels in FY 2021, the U.S. senior housing industry experienced four consecutive quarters of occupancy growth through Q2 2022.
• Assisted-living care reported the strongest increase in occupancy during Q2 2022 with 78.8% occupancy, up from its pandemic low of 74.1% and still below its pre-pandemic level of 85% occupancy.
• The positive sentiment around occupancy recoveries was echoed by large operators within the U.S. nursing home space. On their Q1 2022 earnings call, The Ensign Group, Inc., cited quarter-over-quarter increases in occupancy among skilled-nursing residents as a primary growth factor.

Get the pulse of the industry

Download a copy of the Healthcare M&A update H1 2022 for more information on:

• Financial performance of specific healthcare sectors 
• Major U.S. indexes performances
• Potential pricing regulation
• Industry challenges in 2022

To view more on this topic or learn how Baker Tilly specialists can help, contact our team.

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