Bolstered by a number of megadeals over the course of the year, the value of deals between healthcare entities skyrocketed in 2017, according to a new analysis.
Deal value over 2017 increased by 145.8% compared to 2016, totaling $175.2 billion, according to a report from PwC's Deals Practice. The value of deals in healthcare increased by such a wide margin despite the fact that number decreased slightly from 2016, dropping by 2.5% to 967.
A number of big ticket mega-mergers boosted 2017's figures, according to the report. In particular, the planned merger between CVS and Aetna accounted for 44% of deal value in 2017, as it's worth $77 billion on its own. However, even with the CVS-Aetna deal discounted, the value of deals in 2017 still topped 2016 by 37.8%, according to PwC.
Deals reported in the final quarter of 2017, including the CVS-Aetna deal, and the Republicans' tax reform bill portend that the industry's hunger for mergers and acquisitions will continue in 2018, Thad Kresho, U.S. Health Services Deals Leader for PwC, said in the report.
"Q4 transition activity and the recent tax reform passage presents favorable momentum heading into 2018, where we expect to see continued activity in many of the health services sector," Kresho said. "Private equity interest also continues to be high, with additional capital being raised and new entrants entering competitive processes."
Overall, five deals announced in 2017 had values exceeding $5 billion and were together worth $104.8 billion, according to the report. And a number of blockbuster deals were strategically significant without revealing their value, including proposed mergers between Dignity Health and Catholic Health Initiatives and Aurora Health Care and Advocate Health Care.
Kaufman Hall also made note of the growing number of deals between large healthcare organizations. Through the third quarter of 2017, eight hospital transactions were announced with combined revenues of $1 billion or more, double that announced in 2016.
Long-term care deals represented nearly a third (31%) of all deals announced last year, but the highest values were in managed care, thanks largely to the CVS-Aetna deal, according to the report. Because CVS's purchase of Aetna carries such a high price tag, the value of deals in managed care increased by more than 5200% compared to 2016.
Some sectors, however, saw a decrease in the value of deals made last year. Merger and acquisition deals between hospitals in decreased in value by 62% compared to 2016, and deals for laboratories, imaging or dialysis centers decreased in value by 74.1%.