The second quarter of 2018 was another robust one for healthcare deal-making, with more than 200 deals announced for the 14th quarter in a row, according to a new report.
PricewaterhouseCoopers issued its quarterly insights on healthcare mergers and acquisitions and noted that 255 deals were announced in second quarter. This marks a decline of about 7% compared to the first quarter of this year, but an increase of about 9% compared to the second quarter of 2017.
The total value of these deals was $24.6 billion, a marked decrease from the first quarter of 2018 and the fourth quarter of 2017, but Thad Kresho, U.S. health services deals leader at PwC, told FierceHealthcare that this isn't a sign of decreased interest in mergers.
"The activity stays strong across all sectors," Kresho said. "One quarter it's one subsector, another quarter it's another subsector."
A trend highlighted in the report that will be one to watch is private equity's increasing interest in healthcare, Kresho said. Three deals involving private equity firms in the second quarter were valued at $1 billion or more, the headliner being investment firm KKR's planned purchase of Envision Healthcare.
Kresho said that private equity firms, because they see healthcare as a valuable sector for investment, have "gotten more in tune" with the industry and have better infrastructure in place to evaluate potential deals. This includes, for instance, hiring executives with knowledge of the industry to provide insights, he said.
Private equity's interest in healthcare has also fueled some of the increasing prices and values of deals, Kresho said.
"At some point, you'd think [price increases] would slow down," Kresho said. "That competitiveness is fueled by the PE folks."
Other recent deals involving investment firms include Humana joining forces with Welsh, Carson, Anderson & Stowe and TPG purchasing post-acute care providers Kindred Healthcare and Curo Health Services. ProMedica Health System also partnered with a private equity firm, Welltower, to purchase HCR ManorCare.
Private equity has also been involved in other types of deals; for example, investment firm Elliott Management has made a bid on electronic health record company Athenahealth.
Several healthcare subsectors were especially ripe for deal-making last quarter, according to PwC's analysis. Long-term care was the most active, with 104 or nearly 41% of deals in the second quarter in that area. Value was highest in medical groups, bolstered by the blockbuster KKR-Envision deal.
Interest in managed care and home healthcare was also on the rise, according to the report. Deal volume in managed care increased by 100% compared to the year before and increased by nearly 67% for home healthcare.
PwC said in the report that its analysts expect M&A activity to continue at a similar rate through the rest of the year amid regulatory uncertainty and continued financial pressure. Plus, new entrants to the market, such as Amazon and Walmart, could drive mergers and acquisitions.
"It seems that every day someone that wasn't a healthcare company is interested in becoming a healthcare company," Kresho said.