There were fewer M&A transactions in 2021, but they were greater in size: analysis

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In a report, Kaufman Hall analysts noted that several factors drove current M&A trends, including organizations becoming more selective when it comes to identifying potential partners. (SB/GettyImages)

Though there were fewer mergers and acquisitions among hospitals and health systems in 2021, the size of the transactions was greater, a new analysis has found. 

The analysis, put out by Kaufman Hall, determined that eight of 49 (16%) transactions in 2021 were considered megamergers, where the seller or smaller partner averaged $1 billion in annual revenues. That’s nearly double the percentage of these types of transactions in 2020, and also the highest in six years.

Most transactions, however, saw the smaller partner’s revenue between $100 million and $500 million.

In a report on the findings, Kaufman Hall analysts noted that several factors drove these trends, including organizations becoming more selective when it comes to identifying potential partners. Criteria include wanting to bolster intellectual capital, expand capabilities and access new markets. The analysts also expect to see more partnerships that help address systemic issues like social determinants of health. 

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Organizations in good credit standing were the smaller partners in many transactions in 2021. The proportion of transactions involving nonprofit health systems as acquirer and seller increased, representing 87% of transactions (up from 81% in 2020). The vast majority of deals were a nonprofit acquiring a nonprofit (69%), followed by a nonprofit acquiring a for-profit (14%). 

Similarly, transactions involving rural or urban/rural sellers went up to 31% from 24% in 2020.

When looking at the most notable transactions, one trend analysts found was the sale of regional or market-concentrated facilities or assets—in what is presumed to be a rebalancing of core offerings among multiregional health systems.

Another trend was academic medical centers sharing and expanding their expertise through partnerships, like that between University Health Care System in Augusta, Georgia, and Piedmont Healthcare. Finally, addressing health equity through partnerships was identified as a main trend and explicit partnership goal.

Even before the pandemic, the analysts noted, the ongoing shift from inpatient to outpatient care, tech advancements and the consumerization of healthcare drove providers to focus on specific segments of the market without the associated costs that come with providing acute inpatient services.