April 25, 2022

Healthcare M&A at Near Record in Q1

The first quarter in 2022 featured a strong mergers-and-acquisitions climate with a near-record 712 deals, according to new acquisition data from Irving Levin Associates. Activity in Q1 2022 exceeded Q1 2021 when 635 transactions were announced.

“Although deal volume slowed by 5 percent compared with Q4 2021, private equity remains a dominant force in the industry as health systems are on the acquisition trail, expanding their presence across the continuum of care,” according to the report.

Activity in sectors such as Physician Medical Groups and Long-Term Care spurred much of the volume, with 129 and 127 deals, respectively. The most active sector was “Other Services” with 143 deals announced, a small decrease of 5 percent compared with Q4:21.

More Activity in Sale Leasebacks

Kelly Largent, Vice President, Northmarq, tells GlobeSt.com that with all of the M&A activity that’s been occurring in the healthcare space, it’s creating more opportunities for companies to execute sale leaseback transactions in order to fund future growth.

“We facilitate sale leaseback programs for multiple healthcare providers that range in size and operational complexity—from Fortune 200 on the large end to private practitioners on the small end—and in recent years, market conditions have altered their strategies,” Largent said.

“We’ve encouraged a shift in disposition strategy from frequent portfolio transactions to individual asset transactions to monetize the spread in pricing due to the inefficiencies in the market.

“As interest rates rise, we’ll be watching to see what impact this has on yield and pricing trends. In the healthcare space, because it’s e-commerce aligned compared to other asset classes, we haven’t seen cap rates impacted. For the immediate future, and as long as there remains a supply-demand imbalance in the market, I expect we’ll continue to see aggressive pricing on healthcare real estate compared to other asset classes.”

Hospital Transactions Limited, But Should Increase

Demand for healthcare real estate, such as medical office buildings and life science properties, also drove the first quarter while tailwinds in the Home Health & Hospice and Behavioral Health Care sectors had those areas stable.

Hospital transactions, however, fell dramatically, with only one merger closed, compared with 17 in the Q4 2021. Irving Levin Associates expects Q2 to be more active.