United States

Q3 2016 Health Care Industry Spotlight


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Driven by shifting policies and economic realities, the ongoing evolution of the health care industry and investment therein continues apace. Health care expenditures across the United States are projected to average 5.8 percent from 2015 to 2025, outpacing growth in domestic GDP by 1.3 percentage points. Although growth in private insurance health spending on physician and clinical services has tempered somewhat, overall health spending growth will accelerate primarily due to increasing Medicare and Medicaid spending, as a result of changing demographics. Swelling compensation for labor as well as competition are also factors.

Although M&A deal volume in health care declined in the second quarter, timing may be the most impactful factor contributing to the decline, as deals are taking longer to close.

Key highlights from the second quarter:

  • At 228 completed transactions in the second quarter, M&A declined to a volume unseen since early 2013. Overall value remained robust at $62.6 billion due primarily to one outlier deal. In fact, average deal size shot up to the second-highest tally of the same time frame—an immense $1.1 billion, signaling the sheer effect of Shire’s combination with Baxalta, which came in at a mammoth $32 billion.
  • At 232 closed private equity (PE) transactions for a combined $33 billion in total value, PE buyers are still quite active, even if they have distinctly slowed their pace in the past few months.
  • The health care services segment saw 142 transactions for the first half of 2016, for a total of $18.8 billion.

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