Merger and acquisition activity within the healthcare sector was up in the third quarter of 2013, according to a report from M&A data publisher Irving Levin Associates.
In the third quarter of this year, deal volume was up nearly 16 percent (with 267 deals) compared to the previous quarter (with 231 deals), and the third quarter of this year outperformed the third quarter of last year by almost 20 percent.
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Even though deal volume was up, deal value was down 4.2 percent ($50.8 billion) compared with the second quarter of the year ($53 billion). However, deal value increased by 35.1 percent compared with the third quarter of 2012 ($37.6 billion).
While five sectors posted declines in the number of deals announced over the previous quarter, hospitals had 24 deals announced in the third quarter, up 20 percent from 20 deals the previous quarter and 33.3 percent from 18 deals in the third quarter of 2012.
Overall, the healthcare services sector posted a 6 percent gain, with 160 deals, over the second quarter of the year and a 13.5 percent gain over the third quarter of 2012.
The outlook for the future is more consolidation, says Moody’s Investors Service, which reported recently that consolidation among U.S. for-profit hospital operators is accelerating, and as these operators prepare for the wider implementation of the Affordable Care Act, it’s likely that the acquisition activity will continue.
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"We expect acquisitions, joint ventures and other strategic alignments to continue as for-profit-hospitals seek to offset anticipated declines in reimbursement under the Affordable Care Act," said Dean Diaz, senior vice president of Moody’s Investors Services, in a written statement. "Payment models that focus on outcomes rather than the number of procedures performed will reduce reimbursement, so hospitals will need to leverage administrative costs, purchasing power and investments in infrastructure."
The report added that the expected reduction in the number of uninsured patients under the Affordable Care Act will benefit profitability, offering hospital operators the opportunity to quickly reduce leverage taken on to complete acquisitions.
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