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If there were any doubts about the resilience of the healthcare industry and its ability to withstand a global pandemic, those doubts have been put to rest. After showing signs of recovery in the second half of 2020, healthcare merger and acquisition (M&A) activity boomed during the first quarter of 2021 across multiple sectors, with a total of 596 transactions announced (representing a 42% increase over the same quarter last year).
The resurgence was fueled, in large part, by high transaction multiples and an abundance of weary, smaller providers seeking the stability and capital resources of private equity (PE)-backed platforms and other strategic buyers. According to Health Capital Consultants, Q1 2021 PE transaction volume came in lower than expectations given the strong activity in the latter half of 2020. However, they point to an unusually high concentration of transactions in the second half of 2020 (including transactions postponed at the outset of the pandemic and transactions that otherwise might have spilled into 2021 but for anticipated tax changes following the November elections, all of which closed in the second half of 2020) as artificially inflating the numbers and, in turn, expectations. The same consultants also remark that the average value of PE transactions (measured by seller revenue) increased from the same quarter last year. PE activity is expected to remain strong and increase through the remainder of 2021.