Back in June at the close of the first half of the year, dealmakers told Mergers & Acquisitions that healthcare M&A pipelines were full due to payer interest in vertical integration, horizontal mergers and IT-related synergies. Those words now look prophetic, prompting a closer read of the drivers propelling sector activity.
“The dynamic within the market overall is interesting,” explains Melinda Durr, principal at EY-Parthenon Healthcare at a media roundtable earlier this year. “There’s pretty active PE engagement in terms of deals. In past 6 months, there is payer specific activity looking to vertically integrate through benefits to the provision of care, as well as provider consolidation. It’s a different dynamic that’s leading to a high level of deal activity.”
ModivCare’s $340 million acquisition of care provider CareFinders last month, and healthcare focused Third Alpha’s $150 million SPAC IPO are merely the latest data points in a slew of positive indicators for sector consolidation.
“One of the main things I’ve been seeing as we think about providers is a focus beyond the clinical care setting: in-office volumes declined for a period of time and went to zero,” Durr explains. “Thinking through care provision at home, it’s not just providers—payers are realizing they need greater influence and ownership of care delivery assets. They’re partnering with [primary care providers] and thinking through provision of care in the home.”
Recent bets on telemedicine show this thesis continues to bear fruit in the third quarter: Aquiline Capital’s purchase of Avera eCare and Omnicell’s acquisition of FDS Amplicare are a few of the latest examples.
Healthcare plays remain interesting to PE looking to offload newly created platforms to payers; the trend continues!
– Brandon Zero
