Healthcare Industry

Q3 2022: Mergers and Acquisitions Trend Report

Industry Overview

  • The overall outlook for the Healthcare Industry is positive. As the population continues to age and demands more general and specialized medical care, one can expect business to expand within this sector of the economy.
  • Inflationary pressures combined with outpacing healthcare input costs and labor shortages may constrain the future profitability of operators within the sector. These effects depend on how heightened costs are passed along through
    negotiated contracts with public and private payors.
  • The Healthcare Industry is made up of hospitals, ambulatory healthcare services, nursing, residential care facilities, and social assistance services.

Key Industry Trends

  • Operators in this industry are expected to benefit from technological innovation and the digitization of healthcare. Telemedicine, artificial intelligence for program matching, and pharmaceutical research are poised to bolster the field.
  • The number of enterprises in this industry is expected to increase over the next five years.
  • The industry has been characterized by the ongoing effects of the COVID-19 pandemic and the accelerated adoption of telemedicine, resulting in a complex and changing regulatory environment over the past five years.

Recent M&A Transactions

Historical Performance

  • Expanded Medicare and Medicaid funding over the past five years has contributed to a funding uptick in the latter half of the current period. In 2020, federal funding for Medicare and Medicaid rose 15.1% to cover working-age adults following a loss of employer-sponsored insurance.
  • Over the past five years, health expenditures increased at a 2.5% annualized rate while federal funding for Medicare and Medicaid grew at a 4.4% annualized rate.

Future Industry Growth

  • Increased merger and acquisition (M&A) investment from private equity is expected to benefit the industry and alleviate the economic burden of replacing outdated technologies.
  • The healthcare sector is likely to undergo transformation during the five years to 2027. Digitization, technological advances, and strategic capital investment will open new opportunities as provider organizations expand physician networks and create economies of scale.

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