Industry Voices—How Could the COVID-19 Pandemic Impact Transaction Activity?

Fierce Healthcare

Gary W. Herschman, Member of the Firm, and Zachary Taylor, Associate, in the Health Care & Life Sciences practice, in the firm’s Newark office, co-authored an article in Fierce Healthcare, titled “Industry Voices—How Could the COVID-19 Pandemic Impact Transaction Activity?”

Following is an excerpt:

Consolidation and a changing U.S. healthcare market continue to drive investment activity to record levels.

Healthcare transactions in 2020 started off at a fast pace, consistent with the uptick in activity throughout 2019, but could slow down over the summer due to the temporary impact of the coronavirus pandemic on the economy.

Transaction activity in 2021 may depend upon election outcomes and possible changes a new Congress or administration could bring.

Key drivers

This projected growth is largely driven by the increasing confluence of the following three key drivers:

  1. The ongoing national imperative of reducing the cost of healthcare, via disease prevention and detection, and cost-effective, quality treatment, including more efficient care in ambulatory and retail settings;
  2. Extraordinary advances in technologies which enhance disease prevention, detection and cost-effective treatment (e.g., artificial intelligence (AI)-driven diagnosis and treatment, virtual care, electronic medical record (EMR) systems, medical devices, gene therapy and precision medicine); and
  3. The aging baby-boomer population, with tens of millions of Americans entering their 70s, 80s and above. (According to the AARP, 10,000 baby boomers are turning 65 every single day, and this is expected to continue into the 2030s.)

What 2020 activity is telling us

The 336 healthcare industry transactions in January and February 2020 demonstrate a continuation of last year’s upward momentum. While it is not uncommon to see high deal volume in January, due to deferring taxes on gains until the following year, transaction volume this year was nearly double that of January 2019, indicating that industrywide healthcare transactions are likely to continue to exceed 2019 benchmarks. Healthcare IT and life sciences deals were most active, with a combined 70 transactions.

This high-volume activity is likely driven by an increased interest in wellness solutions, enhanced care coordination and high-quality, cost-effective treatments. Physician group deals are also highly active, as practices understand the value of being part of larger organizations possessing substantial infrastructure and capital, which allow the practices to compete and remain relevant in their regions and specialties. Long-term care, as well as home health and hospice, show no signs of slowing down as the number of individuals needing services along the long-term care continuum continues to grow.