As health care merger and acquisition activity continues to grow in the first quarter, home health and hospice transactions hit a minor snag to start the year, despite seeing a nearly 30% increase a quarter ago, recent data indicates.
Overall health care M&A activity grew 24% during the first quarter of 2015 to 355 total deals, compared to the 285 recorded in the same period one year ago, according to Irving Levin data reported by Health Care M&A News. On a quarterly basis, first quarter deals were up just 1%.
On the services side, total M&A activity was up 19% year-over-year in the first quarter at 203 total deals, but down 4% when compared to the fourth quarter of 2014, which saw 212 transactions. Services include home health, hospice, long-term care, hospitals, rehabilitation, physician medical groups, behavioral health care, managed care, as well as laboratories, MRI and dialysis.
Health care services represented 57% of the first quarter’s transaction total. Slightly lower than the first quarter of 2014’s share of 60%, the decline in 2015 was due in part to a number of slow-downs happening in service sectors, including home health and hospice.
Home health and hospice was one of the few service types to see a decrease in M&A activity on both a quarterly and yearly basis. The sector recorded 16 deals during the first quarter, a drop of 20% compared to the fourth quarter of 2014, and a decrease of 16% compared to the first quarter of 2014.
The long-term care sector continued to see the most transactions with 65 in the first quarter, the same amount recorded in the comparable period a year ago, though down 23% since the previous quarter’s 84 deals.
In terms of dollar volume, combined spending total in the first quarter was $104.9 billion, approximately 24% less than $138.4 billion spend in the previous quarter. However, M&A activity is likely to remain strong for a number of reasons.
“Capital is still easy to come by, and debt is still cheap,” said Lisa E. Phillips, editor of Health Care M&A News. “The Federal Reserve has signaled that interest rates could rise in the next few months, so some deal makers may try to close deals before that happens.”
Written by Jason Oliva