Despite recent widespread compression in profitability (gross margins and EBITDA margins), the total enterprise value of public companies across the healthcare industry continues to increase, reveals an analysis from PCE.
The analysis, which examines healthcare M&A activity, reports that every subsector of healthcare experienced a drop in M&A transaction volume in the fourth quarter of 2013 except equipment and supply. However, things are expected to change. The analysis states: “Most M&A professionals involved in the healthcare industry attribute the 2013 year end ‘wait and see’ mood to the anticipation and uncertainty of the rollout of the Affordable Care Act (ACA) compounded by the Federal government’s divisive decision-making budget malaise. The ACA has now been launched, Washington budget policymaking appears to be recovering, and the public equity markets are at record highs, so the tentativeness toward M&A and investing in this sector is expected to dissipate in 2014.”
Over the past 10 years, healthcare was the hot industry in terms of M&A, with average volume growth of 17.8% per year and a whopping 75.4% overall increase, according to PCE. The segment grew from 784 transactions in 2004 to 1,375 in 2013, fueled mostly by an ever-changing business and regulatory environment.
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