Gary W. Herschman, Anjana D. Patel, and Zachary S. Taylor, attorneys in the Health Care & Life Sciences practice, in the firm’s Newark office, co-authored an article in Bloomberg Health Law & Business, titled “Record Number of Health-Care Deals Close 2021 with a Bang.” The piece was also co-authored by Hector M. Torres, Managing Director at FocalPoint LLC, and Larry Kocot, Principal at KPMG LLP, and Carole Streicher, Partner at KPMG LLP.
Following is an excerpt:
As expected, December 2021 was jammed-packed with over 300 health-care industry transactions—the most active month of the year, bringing total announced/closed deal volume for 2021 to nearly 3,000. This was driven by the customary year-end “rush” to close deals, combined with a booming health-care industry, and investors with over $2 trillion in “dry powder” desiring to increase their focus investing in the growing (and largely recession-proof) health-care space.
December also capped a busy Q4 as the last three months of 2021 had the highest deal volume of any quarter in 2021 (762), although transaction volume remained relatively steady throughout the year, with more than 700 transactions announced or closed in every quarter (Q1: 723; Q2: 721; Q3: 712).
The following seven sectors were the most active, each with at least 100 deals: life sciences (524); health-care IT (422); physician practices (393); medical device (374); cannabis (283); home health (150); and behavioral health (137)
During 2022, activity in these sectors should remain robust (and could even surpass 2021 levels) due to strong investor interest in all aspects of the health-care industry. Advances in high-quality health-care treatments, technology, and diagnostics will always be compelling to investors as our elderly population continues to grow, and the baby boomers continue to retire.
Health-care industry transaction volume could, however, be negatively impacted due to headwinds developing from: (i) a precipitous rise in interest rates (to combat inflation), which would increase the cost of debt capital and, in turn, could reduce valuations offered; and/or (ii) exacerbation of supply chain issues.
Physician Practices & Services
In December, physician practice and services led all sectors with over 50 reported deals. This sector continues to be extremely active based on a number of factors, including:
- physicians’ desire to “monetize” the true value of their medical practices while valuations are very high;
- future uncertainty (and reductions) in reimbursement levels and models of care;
- heightened competition by hospitals and other large companies/platforms;
- the benefits of being part of larger organizations with substantial capital for growth, advanced EMR/data analytics, and seasoned executives; and
- “FOMO” with respect to deals they are hearing about from their physician colleagues they trained with, in their communities, and at national specialty association conferences.
About 30% of these transactions (or 16) were in the eye care space, followed by 13 primary care groups (including urgent care), six orthopedic practices, and five OBGYN deals.
With respect to eye care, Sheridan Capital portfolio company Atlantic Vision Partners was highly active in the month, completing five acquisitions which further expanded the group’s footprint in Virginia and Tennessee. The platform has completed 16 acquisitions to date since Sheridan Capital acquired the practice in 2019.
Another deal of note was the acquisition of UrgentMED, a large, independent urgent care network in Southern California, by Quilvest Capital Partners. Headquartered in West Hollywood, UrgentMED operates 35 urgent care clinics in the Southern California region, including Los Angeles County, Orange County, and Ventura County. The dealfollows a stringof recent activity involving urgent care providers, including five closed transactions in December.
We expect transaction volume in the physician services sector to continue to be on the rise during 2022 in all subspecialty areas, especially those that have multiple ancillary services (including ambulatory surgery), substantial growth potential, experienced value-based care programs, and experienced management teams.
