201510.12
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2015 Q3 Announced Hospital M&A Activity Report

Target Beds: Average 296: Median 120
Target Rev. ($’s MM): Average $268; Median $86

Q3 2015 pace of activity—28 announced transactions—was in line with that of the prior two quarters in 2015, and based on year-to-date levels, calendar 2015 full year activity is likely to be in the 105-115 range, outpacing announced activity from 2014.

Divestitures and pruning of portfolios continued in Q3 by both not-for-profit and for-profit healthcare systems.

Median transaction size in terms of number of beds dipped by 25% in Q3 from the prior four-quarter median size of 160 beds as sub-50 bed transactions and small specialty hospital transactions were prevalent.

Announced activity does not tell the full story—Georgia, for example, had two announced transactions in Q3, but there are at least four other hospitals and systems that have publicly announced searches for partners or that are in exclusive negotiations (Athens Regional, Gwinnett, Memorial Savannah and West Georgia in total representing $1.8B in net revenue).

The southeast was the busiest region representing over one-third of the activity in Q3 with non-Medicaid-expansion states leading the way.

Five transactions during the quarter involved new JV’s, unwinding of JV’s or conversions of JV’s to full ownership models.

LifePoint Health was the most active for-profit during the quarter with three announced acquisitions.

Regulatory hurdles–FTC and Attorney General challenges, as well as self-reporting on physician arrangements—continue to cause delays in transactions and more frequently end in abandoned transactions or a change in partners. In March 2015, Prime Health withdrew from its proposed transaction with the Daughters of Charity Health System due to Attorney General conditions perceived by Prime as very burdensome and restrictive. In July 2015, BlueMountain Capital Management, a private equity firm, announced plans to recapitalize Daughters of Charity.

Download Q3 Transaction List