Healthcare Industry

In April, we published our 2024 Global Healthcare & Medical Industry Report, which covered the surging value of the healthcare market and the positive expectations regarding M&A activity and deal value for this year. As we move further into the year, we are seeing more positive private equity trends and investment strategies for the healthcare services industry, as dealmaking is now beginning to pick up momentum following a bit of a decline in Q2 of 2024. Investment pipelines are starting to build up at the same time that seller expectations are being tempered.

According to Verified Market Research, the global healthcare market will reach $665.37 billion by 2028. The healthcare sector is primarily segmented into pharmaceuticals, services, devices, and others. By application, the industry is categorized by cardiovascular, oncology, anti-infection, central nervous system, respiratory, and others.

Explore the latest insights and trends shaping the 2024 M&A landscape in our newest article. Discover key strategies and predictions that could redefine business acquisitions this year. Stay informed and ahead of the curve with Benchmark International's comprehensive outlook.

Behavioral healthcare services M&A has been on the rise in recent years due to the high demand for mental and behavioral health services in the US. The behavioral healthcare market saw a 45% increase in 2022 versus the prior year and remains a fast market in early 2023.Outpatient behavioral healthcare services have become increasingly popular due to their accessibility and cost-effectiveness. As more patients seek treatment for mental and behavioral health issues, the demand for outpatient services grows. Investors are particularly interested in outpatient services that offer comprehensive care, including individual and group therapy, medication management, and community-based support services.In addition to private equity firms, strategic buyers such as healthcare systems and payers also show interest in the behavioral healthcare services market. These players want to diversify their revenue streams and expand their offerings to meet the growing mental and behavioral health services demand.Recent federal funding and investments to expand coverage and access to critical services have also increased M&A activity in the behavioral healthcare services sector. In March 2022, the US House of Representatives passed a $1.5 trillion spending package that included financial support programs to expand mental healthcare. The package granted $2.14 billion in funding to the National Institute for Mental Health (NIMH) to bolster research on the impact of the pandemic on mental health, an increase of $37 million from 2021.

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Investors are currently seeking opportunities that will allow them to invest their funds in safe-havens.

In the first half of 2021, medtech M&A deals already surpassed the total number of deals from last year, and this bustle in activity is forecast to continue through the second half of the year, as medtech companies have stockpiled billions of dollars in cash. The dollar value of deals in 2021 is also expected to far outpace that of 2020. Eleven megadeals were announced in H1, with a total deal value of around $128 billion.

The Covid pandemic has placed us squarely in unprecedented times. We know this is not exactly news at this point. However, counter to the tenor of most pieces you've probably read on the topic during the past 12 months, this one aims to shine some light on one industry that has thrived: The US healthcare market, more specifically, healthcare M&A. Healthcare M&A has generally been a big winner in 2020 and into 2021 and it's happening at both ends of the market. Loss of life has been a sad reality of Covid, and the US did not prove to be an exception to the global impact of the disease. To combat this deadly virus and the financial disaster that reverberated from it, federal and state action has played a massive role in both the creation and distribution of vaccines, as well as seeking to gird sectors of the economy most impacted by the pandemic response, or most crucial to battling the disease. And considering the sluggish years that followed the Great Recession, the federal government has erred on the side of a more robust approach versus a more measured response from a fiscal perspective. Stimulus bills proceeded to roll out, injecting money into the economy on an unequal basis, with healthcare emerging as a clear winner.In late March of 2020, the CARES Act was signed into effect. The emergency relief bill totaled roughly $2 trillion, of which $153.5 billion was directed toward public health. This included hospitals and other health centers, drug access, telehealth, and medical supplies. These businesses essentially received free money to ramp up production and capabilities to meet the demand created by the virus. This pumped their top and bottom lines, as well as their stock prices, to all-time highs. A flood of buyers looking to get in on the trade continued to follow, with companies, both private and public, selling at levels not previously anticipated.The influx of investments led to an increase in the overall number of deals getting completed and the levels of total consideration in these deals. Healthcare technology, for example, has been a key fast stream during 2020 and early 2021, as "contactless" options for seemingly all human interactions surged (or we even mandated by government entities and actors). One might think of health tech as one "bookend" of the market – it has indeed received a lot of press, and a fair amount of investment capital has followed. Yet, at the other end of the market, savvy buyers and medical entrepreneurs have been getting together to do some equally interesting deals. Seemingly less attractive but well-placed and well-managed traditional medical practices, which act as the backbone for a strong healthcare M&A environment, are participating on the upside. Physician groups and healthcare facility consolidation were already a significant trend before the pandemic. This trend provided economies of scale that drastically increased margins and market share. Given the macro tailwinds of 2020, these roll-ups continue apace and continue to offer great buyer and seller opportunities. With a long track record of demonstrated upside – combined with a surging healthcare market – it is expected that this trend will continue, if not increase, throughout 2021. The Covid-19 pandemic was a major "Black Swan" event in the US market and the global world economy. It has not only quickly changed the way people around the world live their lives today but also has spurred healthcare professionals, entrepreneurs, and investors to re-think modus operandi, possibilities, and options across the healthcare market – and to invest accordingly. Whether you are positioned as a well-managed single or multi-office family medical practice, or if you have countless existing (or emerging) tech and/or healthcare products fast-streams, the world is presenting a host of options to consider for buyers and sellers of all stripes.

As we reach the middle of Q3, a look back at the past several months in the healthcare sector indicates certain key trends for the industry and how it is expected to undergo transformation into the future.

Common drivers of mergers and acquisitions in the global health and life insurance industry include the entry into new markets, access to new technologies, valuation trends, and reaction to regulatory changes. With growth strategies leading the charge, market expansion is often made possible through the acquisition of target companies that optimize product portfolios and customer bases, especially those that provide relatively easy yet quite valuable add-on opportunities, as organic growth does not come easily in the insurance space.