Q3 Market Update: Market Activity Continues to Move Forward, Despite Pandemic
Following the economic restart, there was a promising rebound in consolidation activity in the third quarter. Provident attributes improved deal-making activity, despite the pandemic, to increasing visibility around consumer sentiment and economic conditions, especially as states continue reopening under restrictions. For the healthcare sector, this rebound has included the re-opening of businesses for non-emergency medical procedures that were initially sidelined due to virus-related shutdowns. For many healthcare companies, volumes have either returned to normal or increased as patients caught-up on overdue procedures and services deferred in the previous months.
As companies, investors, and consolidators adjust to the new normal, these improving economic conditions have led many industry participants to resume their pursuit of merger, acquisition, and investment opportunities. For operators, stabilized operations have allowed managers and shareholders to refocus on transaction initiatives and new growth opportunities. As an example, The Providence Service Corporation, a leading provider of non-emergency medical transportation services, announced its acquisition of Simplura Health Group, a multistate personal care services agency, in a $575m transaction aimed at expanding the company’s operations into the home care arena. Private equity firms have similarly been able to redirect attention from portfolio company operations to new investment opportunities. In a deal indicative of evolving private equity sentiment in physician services, FFL Partners announced the creation of U.S. Orthopedic Partners, a platform for expansion and consolidation within the orthopedic specialty. These factors have led to an overall increase in activity; although overall capital invested was down from Q2 to $12.6B, deal volume has increased from last quarter, showing promising signs for Q4 and 2021.
Within the Veterinary Services sector, there were a number of transactions in the third quarter. Berkshire Partners acquired VetStrategy at a valuation of $1.4 billion, one of the largest transactions this year in the space. VetStrategy has over 600 veterinarians, 180 hospitals and is in nine Canadian providences. Additionally, Compassion-First acquired Long Island Veterinary Specialists in the Northeast. The company now has 43 specialty and emergency veterinary hospitals located in 12 states.
Healthcare IT remains highly active as investors continued to pursue transactions in the sector, capturing 29 deals for the third quarter. The healthy demand for investments in this space can be observed through Teladoc’s strong appetite for acquisition activity in 2020. Following Teladoc’s acquisition of InTouch Health in June, the telehealth giant announced yet another mega-merger with the acquisition of Livongo, a digital health management company, for $18.5B. Also in this quarter was a $1.35B merger between eSolutions and Waystar, a revenue cycle management provider, representing another example of consistently high valuations within Healthcare IT.
Radiology recorded markedly strong activity, illustrated by Radiology Partners’ $885M acquisition of MEDNAX Radiology Solutions. The transaction integrates two leading radiology players to establish a premier industry provider with increased quality and scalability of services in order to drive cost savings to the bottom line. The combined entity comprises 2,400 radiologists with a presence in 50 states.
As year-end approaches, Provident expects that overall consolidation activity will continue to increase as newly marketed opportunities appeal to a refocused investor universe and transaction closings delayed by the pandemic cross the finish line.
Provident actively tracks and analyzes M&A activity, key developments, and emerging trends among healthcare services verticals. We publish these findings in our quarterly newsletters, which can be accessed here. Provident also invites the readers of our newsletters to view our new Provident Perspectives publications, which focuses on current trends our professionals have identified in a variety of healthcare verticals. You can read some of our new posts here.
To print and download the full Q3 2020 Market Update report, please click below…