The mergers and acquisitions (M&A) landscape is in the midst of the longest bull market in modern history and healthcare M&A continues to lead the way. As the latest decade comes to a close, and the 12th year of economic expansion launches in early 2020, Livingstone’s healthcare practice anticipates many rays of sunshine with a watchful eye aimed at the occasional storm cloud on the horizon. Indeed, healthcare M&A participants (buyers, sellers, lenders) should arm themselves with sunglasses and sunscreen, in lieu of umbrellas and rain boots, for at least the first few years of the new decade.
Each year for the last ten years, an average of 1,500+ healthcare deals were disclosed in North America – a 50% increase relative to the average number of annual transactions closed between 2005 and 2009. Similarly, the average value of a disclosed healthcare deal is up 67% over the last five years (2015 to 2019) compared to the prior five-year period (2010 to 2014). The expansion in average deal value is attributable to high growth rates that increase the size of healthcare businesses and, more importantly, a substantial expansion in valuation multiples, which are most often measured on and applied to pre-tax earnings. In 2019, healthcare deal activity as well as overall deal values will crest all-time highs and the factors driving record volume and prices show no signs of abating.