In the healthcare mergers and acquisitions (M&A) market, while deal volumes varied across different sectors, by and large the sure and steady pace of deal volume in Q2 continued into Q3. Moreover, several positive developments in Q3—namely, the Federal Reserve (finally) cutting interest rates, the courts striking down the Federal Trade Commission’s (FTC) national ban on non-competes, and California Governor Newsom’s vetoing Assembly Bill 3129—may serve as the catalysts needed to boost activity as we head into the final stretch of 2024.
Physician Practice Management
According to data provided by LevinPro, physician practice management (PPM) deal activity appeared steady with 110 transactions reported in Q3. Although still not as lofty as the volumes seen in previous years, the data shows signs that the market is stabilizing indicating only a slight dip from Q2’s reported 127 PPM deals. Many of these acquisitions continue to be smaller “add-on” transactions as private equity (PE) investors look for simpler, less costly transactions that are a buffer against continued market uncertainty. However, many experts are reporting an uptick in activity in recent months—likely due, in part, to the Federal Reserve’s recently announced rate cut and investors becoming more accustomed to (and less fearful of) the increasing oversight of healthcare transactions, including PE investment, at the state level. Indeed, the general sentiment within the investment community seems to be that state notice requirements—which typically add anywhere from 30 to 180 days to a deal’s closing timeline—are a burden, but not necessarily a barrier. These state notice requirements are detailed in the Bass, Berry & Sims interactive map. Moreover, there is optimism that California Governor Newsom’s veto of Assembly Bill 3129 (Bill) on September 28—legislation which would have created significant scrutiny of healthcare transactions in California, and once feared a death knell for PE-backed PPM deals in the state—may signal continued viability of PE investment in the PPM sector.
Perhaps the biggest splash in the Q3 PPM market was Rural Healthcare Group’s (RHG) (backed by Kinderhook Industries) proposed acquisition of Dallas-based Steward Health Care’s Steward Medical Group and Steward Health Care Network out of the Steward bankruptcy for $245 million. Steward, which formerly operated 30 hospitals across eight states, has been subject to a tumultuous year, starting with Medical Properties Trust revealing Steward had fallen almost $50 million behind on rent for its facilities as of early January. The dominoes continued to fall in the ensuing months as Steward shuttered several facilities, faced heavy criticism from Senators Elizabeth Warren and Ed Markey, saw its plans to sell its physician group to UnitedHealth Group’s (NYSE: UNH) subsidiary Optum fall through, and ultimately filed for Chapter 11 bankruptcy on May 6. RHG is now set to take over operations of Steward’s 5,000 physician network. RHG has indicated that it will make “significant investments” in infrastructure and will keep providers in the same facilities in an effort to ensure continuity of care for affected patients. Currently, RHG operates 17 clinics across Tennessee and North Carolina, making the proposed acquisition a major milestone for the company.
On August 26, McKesson Corporation (NYSE: MCK) announced its $2.49 billion agreement to purchase a 70% stake in Community Oncology Revitalization Enterprise Ventures (Core Ventures), the management services organization which manages the non-clinical administrative functions of Florida Cancer Specialists & Research Institute (FCS). FCS is a robust oncology practice of more than 250 physicians and 280 nurse practitioners and physician assistants in approximately 100 locations.
The dental service organization (DSO) market continues to set the pace among specialties in terms of deal volume. MB2 Dental (backed by Charlesbank Capital Partners) remained active in July by acquiring practices in Idaho, Maryland and Georgia. According to its mid-year report, MB2 now features more than 700 practices and 1,500 dentists across 42 states.
Other active DSOs include Arizona-based Imagen Dental Partners and California-based Silver Creek Dental Partners, both of which are venture capital-backed and provider-led, according to publicly available information. After closing eight separate transactions in August, Imagen now features locations throughout California, Arizona, Florida, Wisconsin, Ohio, and Oregon. Meanwhile, Silver Creek Dental Partners acquired Delicate Dental Arts and Los Coches Dentistry, both of which are based in Carlsbad, California.
Clinical Research Organizations
Throughout 2024, the clinical research organization (CRO) sector has remained among the most active across healthcare M&A sectors. In particular, PE firms are attracted to the industry’s strong tailwinds—high margins and sponsors in the pharma and biotech space. As industry conditions demand that CROs—vying to provide the most efficient drug discovery and trial solutions—have larger site networks, many CROs see M&A as a way to scale operations, improve their efficiencies, and tap into technology investments. According to Provident, middle-market PE firms are willing to acquire clinical trial assets that would typically be too small to peak interest, and in turn, pursue aggressive strategies to build density, scale, and diversity in their therapeutic mix.
CROs saw a flurry of activity in June. On June 4, Fortrea (Nasdaq: FTRE), a leading global CRO, announced it completed the divestiture of assets relating to its Enabling Services segment, particularly Endpoint Clinical and Fortrea Patient Access (FPA), to Arsenal Capital Partners. Endpoint and FPA provide randomization and trial supply management, which support the patient journey across clinical trials. On June 18, LongueVue Capital announced that its portfolio company, Pinnacle Clinical Research, successfully completed investments in Kerwin Medical Center, The Cognitive and Research Center of New Jersey, Bellaire Clinical Research, Palmetto Clinical Research–Low Country, and Dallas Research Institute. These additions will expand Pinnacle’s network and expertise in the central nervous system, with a focus on Alzheimer’s disease. On June 25, ToxStrategies, a multi-disciplinary scientific consulting firm of Renovus Capital Partners, announced the acquisition of Clintrex Research Corporation, which operationalizes clinical and regulatory development pathways for new treatments for neurodegenerative and other central nervous system diseases. Also on June 25, Flourish Research, a portfolio company of NMS Capital, announced its partnership with ENCORE Research Group, which has eight locations across Northern Florida. ENCORE has over 100 investigators and focuses on a wide range of therapeutic areas, including cardiology, neuroscience, gastroenterology, and orthopedics.
Likewise in June, Clario, backed by Nordic Capital and Astorg, confidentially filed an initial public offering (IPO) in the United States. Clario provides clinical trial software solutions in over 100 countries. Harvest Integrated Research Organization (HiRO), a global CRO based in Minnesota, acquired DeltaMed Solutions, a CRO specializing in data management solutions. Partners Group, a Swiss PE fund, entered into a definitive agreement to acquire FairJourney Biologics, a Portugal-based CRO specializing in novel antibody treatments. The transaction values FairJourney at roughly €900 million.
Rounding out Q3, on August 5, WCG, a global leader of solutions that measurably improve and accelerate clinical research, announced the acquisition of Array. Array is a leading content engagement partner for life sciences events that combines data, technology, and engagement services to enhance business results and offer insights. According to WCG, the addition of Array will expand WCG’s training capabilities for sites, investigators, and raters in the clinical research space, with the goal of accelerating research start-up timelines, enhancing quality and safety, and alleviating the burden on sites and study teams.
As we reported in Q2, it is anticipated that the CRO market will experience significant consolidation over the next few years given its fragmented nature, leaving plenty of room for investors.
Ambulatory Surgery Centers
Ambulatory surgery centers (ASCs) continue to be a transactional hotspot. According to the Ambulatory Surgery Center Association (ASCA), more than 80% of surgeries are now performed in an outpatient setting. This trend is a product of the significant savings for both patients and providers. Patients generally favor the consumer experience and convenience of an ASC, and physicians generally seem to favor the often highly specialized operating rooms, which have become increasingly more effective due to recent technological advances.
According to Bloomberg reports, Tennessee-based Surgery Partners (Nasdaq: SGRY) is currently exploring a potential sale after seeing its revenues jump by 14% in Q2 2024. Bain Capital purchased a 36% stake in Surgery Partners in 2017 and has overseen its rapid expansion over the last few years. According to an August 23 Bloomberg report, several prominent players in the ASC market have emerged as potential buyers, including Optum and PE group TPG Capital. Optum, a frequently featured player in our reports, is the parent company of Deerfield, Illinois-based ASC chain SCA Health, which operates more than 320 ASCs providing surgical care through 9,200 affiliated physicians. TPG is no stranger to the ASC market either. In January, TPG announced its investment in Compass Surgical Partners, which operates 250 ASCs across the country. TPG has also made investments in Blue Cloud Pediatric Surgery Centers, the largest pediatric dental ASC operator in the country.
Nashville-based SurgNet Health Partners expanded its Southeast presence by acquiring Tuscaloosa Endoscopy Center. The center has provided gastrointestinal diagnostic and therapeutic endoscopic procedures for more than 40 years in the Tuscaloosa, Alabama area. Since its 2022 launch, SurgNet has planted its flag in Michigan, Ohio, and now Alabama.
According to a July 3 news release, Nashville-based AMSURG acquired an ownership interest in Salem, Oregon-based River Road Surgery Center, featuring three operating rooms dedicated to ear, nose, and throat procedures. AMSURG also announced a new partnership with Maryland-based LifeBridge Health and Woodholme Group to open a gastroenterology outpatient surgery center in Westminster, Maryland. Announced on August 26, the proposed center would feature 5,400 square feet and two procedure rooms.
In August, Dallas-based Tenet Healthcare (NYSE: THC), parent company of United Surgical Partners International (USPI), agreed to sell its majority interest in Alabama-based Brookwood Baptist Health to Orlando Health. The deal, valued at approximately $910 million, closed on October 1 and included five hospitals and their affiliated physician practices. This deal is a continuation of Tenet’s 2024 focus on the growth of its surgery center division through USPI. In 2023 alone, USPI added 30 ASCs to its portfolio.
Hospitals & Health Systems
Hospital and health system transactions have gained significant momentum across the country this year, with many deals announced and completed in Q3.
A number of transactions in the hospital and health system sector this quarter have involved academic health systems acquiring rural and community hospitals and smaller health systems. Financial pressures have led many rural and community hospitals and smaller health systems to seek strategic partnerships or acquisitions. These deals offer certain benefits to the acquired systems including, among other things, reduced overall cost of care, enhanced reimbursement opportunities, and improved access to the academic health center’s services. In Q3, MyMichigan Health, a nonprofit health system affiliated with the University of Michigan Health System, acquired three hospitals in Michigan from Ascension; UCSF Health acquired Saint Francis Memorial Hospital and St. Mary’s Medical Center from Dignity Health for $100 million; UAB Health approved an agreement to acquire Ascension St. Vincent’s Health System for $450 million, pending approval of federal regulators and the Vatican; UK HealthCare completed its acquisition of St. Claire HealthCare, a small health system in Morehead, Kentucky; Dartmouth Health acquired Valley Regional Hospital, a 25-bed hospital; and University of Pennsylvania Health System entered into a definitive agreement for Doylestown Health to become part of Penn Medicine, pending federal and state approvals. Not to be outdone, Emory Healthcare signed a letter of intent to add Houston Healthcare into its fold.
Health systems are increasingly engaging in cross-market M&A as they seek to diversify their portfolios, increase their bargaining power, and avoid antitrust regulatory scrutiny of mergers between health systems in the same market. Recent examples of this trend include Kansas-City based University of Kansas Health System’s acquisition of Missouri-based Liberty Hospital and South Carolina-based Prisma Health’s announcement of plans to acquire Tennessee-based Blount Memorial Hospital. Georgia-based Vitruvian Health, formerly known as Hamilton Health Care System, completed its acquisition of Tennessee-based Tennova Healthcare-Cleveland from Community Health Systems for $160 million.
While transactions in the hospital and health system sector have picked up momentum generally, Pennsylvania in particular has seen a significant amount of activity. In Q3 for example, WellSpan Health acquired Pennsylvania-based Evangelical Community Hospital. Philadelphia-based Jefferson Health merged with Pennsylvania-based Lehigh Valley Health Network, creating one of the largest nonprofit health systems in the U.S. As noted above, Pennsylvania-based Doylestown Health signed a definitive agreement for Doylestown to become part of Penn Medicine. Community Health Systems also plans to sell three Pennsylvania hospitals—Regional Hospital of Scranton, Moses Taylor Hospital in Scranton and Wilkes-Barre General Hospital—to Woodbridge Healthcare for $120 million. Prospectus Medical Holdings also entered into a letter of intent with CHA Partners for CHA to acquire Pennsylvania-based Crozer Health.
Finally, we are continuing to see several large health systems divesting hospitals. As noted above, Tenet entered into a definitive agreement with Orlando Health to sell its 70% ownership interest in Brookwood Baptist Health. Ascension entered into a purchase agreement with Prime Healthcare for Prime to acquire nine hospitals in Illinois. On the West Coast, HCA Healthcare (NYSE: HCA) reached a tentative agreement to sell Regional Medical Center of San Jose to Santa Clara County for $175 million.
Home Health, Hospice Care & Personal Care Services
Hospice M&A activity has seen a slump in 2024 compared to previous years—not necessarily due to a lack of interest in the sector, but more likely because of greater regulatory oversight (e.g., greater consequences for failure to submit quality reports, patient safety concerns, and more frequent audits). Additionally, concerns over small annual reimbursement increases have made this sector less desirable, as the 2.9% rate increase in Medicare hospice rates for FY2025 announced under CMS-1810-F on July 30 is generally viewed as insufficient to combat inflation and wage pressures.
However, given the volume of PE investment in the sector dating back several years, we expect many PE-backed hospice platforms will be reaching maturity in the near term and looking for exit opportunities—which may cause an uptick in activity (or at the very least, in the number of motivated sellers within the sector). Despite the slump, one notable transaction in the hospice space is BrightSpring Health Services’ (Nasdaq: BTSG) acquisition of North Central Florida Hospice and Haven Medical Group for $60 million that closed in September. Haven holds 18 certificates of need for hospice care in Florida, which will allow BrightSpring to further expand throughout the state of Florida.
The number of home health and personal care services transactions, meanwhile, appear to have picked up in Q3. There are several transactions of note. The Pennant Group (Nasdaq: PNTG)—a holding company for a group of independent hospital, home health, and senior living providers located across 13 states—announced its acquisition of Signature Healthcare at Home for $80 million in a two-step closing (the latter anticipated to occur on January 1). The acquisition is the largest Pennant has completed to date and will add seven locations to the company’s footprint in Oregon, as well as locations in Washington and Idaho. Chicago-based personal care provider Help at Home, with more than 180 locations across 11 states, announced three transactions in central Georgia, acquiring Care by Your Side, One Care Health, and AAMedcare. Help at Home is backed by two PE funds, the Vistria Group and Centerbridge Partners. Additionally, LTM Group—with operations in Indiana, Ohio, Michigan, and Texas—announced the acquisition of Texas-based Wichita Home Health Services in mid-August, adding over 500 team members and more than 1,000 patients to the company’s network. Finally, HouseWorks, backed by InTandem Capital, acquired Pittsburgh-based personal care services company, Bridge City Home Care.
Meanwhile, the previously announced transaction involving UnitedHealth Group’s acquisition of Amedisys (Nasdaq: AMED), and the related divestiture of certain Amedisys locations to VitalCaring Group, appear to be progressing toward regulatory approval with closing expected by the end of the year. Similarly, Addus Healthcare Corporation (Nasdaq: ADUS) indicated it received Hart-Scott-Rodino (HSR) clearance on its agreement for the $350 million purchase of Gentiva’s personal care business and is now awaiting completion of Texas regulatory approval process.
In early October, presidential hopeful Kamala Harris proposed implementing Medicare coverage of personal care services. Although obviously very preliminary and subject to significant uncertainty, such a move would result in a seismic industry shift, dramatically increasing the number of eligible customers and positioning the sector for significant growth.
Digital Health & Health Information Technology
Digital innovation continues to march forward, with artificial intelligence (AI) attracting the most attention in terms of funding and interest among buyers. Notably, in Q3, clinical technology company Commure announced plans to acquire Augmedix for $139 million in a going private transaction. Augmedix is a healthcare software company whose product utilizes AI to extract and automate the creation and population of electronic medical records with medical notes, documentation, and other structured data picked up from conversations. The transaction was approved by the shareholders on September 27 and its closing was officially announced on October 2.
However, the level of interest in the area of AI may be tested following the Food and Drug Administration’s (FDA) announcement of its new Digital Health Advisory Committee (DHAC) on August 1. As FDA previously explained, the DHAC’s role will be to provide advice and recommendations on new approaches to develop and evaluate digital health technologies, as well as identify risks, barriers, or unintended consequences that could result from proposed or established FDA policy or regulation. It is too soon to gauge, but AI may be in the crosshairs of this FDA committee, and companies offering AI solutions may ultimately come under increased scrutiny. It will be interesting to see what impact, if any, this will have on the number of healthcare AI- and other technology-centered transactions going into 2025.
Behavioral Health
As noted in our Q2 Trends & Transactions report, behavioral health M&A are down this year, with only a few transactions announced and/or completed in Q3. However, despite slower deal activity, we expect deals in the sector to pick up steam as economic conditions improve, especially given the sector remains an attractive one to investors.
Several deals in Q3 involved virtual behavioral health providers. For example, Walmart (NYSE: WMT) completed its sale of MeMD, its virtual behavioral, urgent, and primary care benefits platform to Fabric, a healthcare technology startup. Boston-based Uwill, a virtual mental health provider, also completed its acquisition of competitor Virtual Care Group, a mental health startup focused on college-aged patients.
Other notable deals in Q3 included the acquisition by ABA Connect, backed by PE firm MBF Healthcare Partners, of ABA Therapy of Houston. With the addition of ABA Therapy of Houston, ABA Connect’s network includes 12 centers in Texas and Colorado. HOPE Therapeutics, a subsidiary of NRx Pharmaceuticals (Nasdaq: NRXP), also announced its plans to acquire five ketamine clinics in less than a year. Neuronetics (Nasdaq: STIM), a transcranial magnetic stimulation (TMS) provider, has entered into a definitive agreement to acquire all of the outstanding common shares of its competitor, Greenbrook TMS. Lastly, Ethema Health Corporation (OTCQB: GRST) has agreed to buy Edgewater Recovery Center, a Kentucky-based alcohol and substance use disorder provider.
Finally, outside the context of transactions, it appears funding in the behavioral health sector is holding strong. For example, since July 9, the Cigna Group announced it will provide $9 million over three years to projects providing veterans with housing and mental health support, and another $9 million to 22 nonprofit organizations to provide mental health to support youth. CMS has committed to fund at least 100 new psychiatric residency spots, by establishing an award process for hospitals seeking funding for new residency positions. The U.S. Department of Health and Human Services (HHS) and the Substance Use and Mental Health Services Administration (SAMHSA) unveiled grant awards totaling $45.1 million for mental health and substance use services. HHS and SAMHSA also have allocated $27.5 million to fund opportunities aimed at improving women’s mental health in the United States. These sector stakeholders may now have access to funds beyond investment dollars from PE and strategic buyers.
Managed Care
Overall, deal volume in the managed care space picked up noticeably from the previous quarter, and a few sizeable deals are worth noting. The transactions involving value-based care have trended steadily upward, continuing the years-long pivot away from fee-for-service payment models, particularly in light of CMS’ stated goal of having all Medicare beneficiaries be part of accountable care relationships by 2030. As seen throughout the rest of the economy, companies that boast meaningful use of AI are getting the most attention by investors and would-be acquirors. We anticipate that managed care companies with powerful data analytics and AI platforms will be attractive acquisition targets in the next quarter and going into 2025, particularly if interest rates continue to decline. Indeed, in Q3, there were a large number of managed care-adjacent transactions involving these very technologies.
At the tail end of June, Arcadia acquired CareJourney, a provider of healthcare data and AI-powered analytics and insights. CareJourney’s solution helps streamline reporting of cost, quality, and benchmark data, and its analytics are useful for payors, providers and employers alike. Arcadia asserted that meeting CMS’ goal of near-universal accountable and value-based care necessitates the existence of platforms such as Arcadia’s and CareJourney’s. The new suite of offerings will allow health plans and networks to determine provider quality by establishing benchmarks based on value-based care performance.
In July, technology solutions firm VitalHub announced it had signed a definitive agreement to acquire MedCurrent for $34 million. MedCurrent focuses on improving care quality and managing health system costs through its solution, OrderWise. This AI-enhanced solution gives providers evidence-based guidance at the point of care to help determine the appropriateness of a test, particularly imaging tests. The deal closed on October 8.
In August, Cantata Health Solutions announced it had acquired Geisler IT Services. Geisler is the provider of the Gosh System, a platform that enables managed care organizations (MCOs) to collaborate with service providers to enroll clients; confirm benefit eligibility; submit, process, and adjudicate claims; and receive funding for services rendered to clients. This makes for a key addition to Cantata Health Solutions’ offerings which currently include the Arize electronic health record (EHR) system, revenue cycle management, as well as other clinical solutions. Health Catalyst finalized its acquisition of Lumeon Limited, a leading care management company with operations in both the United States and United Kingdom. Health Catalyst paid nearly $40 million for the company plus a potential revenue-based earn-out of up to $25 million. Epilog Partners acquired Care Connectors Medical Group. Care Connectors is an on-demand value-based care enablement company which partners with payors and risk-bearing providers to manage prospective risk adjustment, quality improvement, and care coordination. Terms of the transaction were not disclosed.
In September, New Mountain Capital announced the completion of a $3 billion merger among The Rawlings Group, Apixio’s Payment Integrity business, and VARIS to form a technology-enabled platform geared toward lowering the cost of care through heightened payment accuracy and proactive identification of errors. The company will serve the largest health plans and will have a wide range of service offerings, including subrogation, benefit coordination, pharmacy payment integrity, and complex claim solutions. According to New Mountain, this combination will impact over 160 million lives and result in over $3 billion in total annual savings and cost avoidance. David Pierre, the former COO of Signify Health who led the company through its IPO and ultimate sale to CVS Health (NYSE: CVS) in 2023, will serve as the CEO of the newly-combined entity. As part of this transaction, Apixio’s Connected Care platform and value-based care solutions were acquired by Datavant Group. Also, NationsBenefits—a leading fintech, benefits, and outcomes platform that is relied on by over 100 health plans—acquired Health Data Decisions, an AI powered healthcare data analytics and healthcare consultancy firm.
Managed care companies themselves were also active in Q3. In July, Centene entered into a definitive agreement to sell Collaborative Health Systems, a management services organization, to Astrana Health. The transaction closed on October 4. In September, Elevance Health entered into a definitive agreement to acquire Indiana University (IU) Health Plans, an MCO created by Indiana University Health. Upon closing, IU Health Plans will become a component of Anthem Blue Cross and Blue Shield in Indiana. At the beginning of October, Carisk Partners, a specialty risk transfer and care coordination company, completed its acquisition of HeadsUp Healthcare, a specialty managed care company which focuses exclusively on head and neck injuries.
Pharma Services, Pharmacy, & Pharmacy Benefit Managers
Amid intense regulatory scrutiny, there were not many large transactions in the pharma services, pharmacy, and pharmacy benefit managers (PBM) sector in Q3. In July, the FTC issued its long-awaited Interim Report on what it views as anticompetitive and unfair behavior on the part of PBMs. In the report, the FTC claims that the entities are both horizontally and vertically integrated and notes that the three largest PBMs—CVS Caremark, Express Scripts, and Optum Rx, i.e., the “Big 3” —process nearly 80% of America’s prescriptions. Among its most damning claims, the FTC states that the consolidation within the industry has resulted in harm to consumers through artificially inflated drug prices, as well as harm to competition through their concentration and integration across the pharmaceutical supply chain, preferential treatment of and steering of patients to PBM-owned and affiliated contract pharmacies, and the use of rebate aggregators.
In the wake of this report, the House Oversight Committee in August issued letters to the executives of the Big 3 directing them to correct what the Committee believes to be false statements delivered before Congress on July 23. The letters gave the executives until September 11 to respond. Subsequently, on September 20, the FTC brought suit against those same entities and their affiliated group purchasing organizations (GPOs) accusing them of engaging in anticompetitive and unfair rebating practices resulting in artificially inflated insulin prices. In light of the upcoming presidential election, and the seemingly bipartisan furor toward these entities, we do not predict this scrutiny to slow anytime soon. In spite of this, the trend toward consolidation in the industry will likely not be stifled absent further regulatory action, as certain market trends have resulted in challenges and closures for independent pharmacies. Thus, we predict continued merger activities in the pharmacy space in the coming quarters.
Notwithstanding the above, there were a few interesting developments and transactions in the sector in Q3. In July, QuVa Pharma acquired LogicStream Health, a SaaS software informatics platform for healthcare system pharmacies. LogicStream uses machine learning and predictive analytics to address drug shortages, while QuVa is the largest 503B outsourcing company for U.S. hospitals. This acquisition will better allow QuVa to provide insights into drug utilization and patient outcomes.
AnewHealth, a national pharmacy care management provider, announced the acquisition of at-home pharmacy solution provider HomeFree Pharmacy Services, following a strategic investment from The Vistria Group. This transaction strengthens its roster of offerings for home health providers, primary care, and specialty care providers, risk-bearing organizations, as well as managed care plans.
Global New Material International Holdings (GNMI) entered into an agreement with Merck KGaA to acquire its global surface solutions business unit for €665 million. Merck’s surface solutions division specializes in producing solutions for coating, cosmetics, and industrial applications.
Finally, Danam Health announced an IPO of its stock through the filing a Form S-1 with the Securities & Exchange Commission. The filing lists as executive officers various pharmacy industry veterans coming from companies such as TRxADE Health and Health Mart, the $10 billion retail pharmacy franchise owned by McKesson.
Rite Aid emerged from Chapter 11 bankruptcy in September. First announced in 2023, the completion of this process resulted in the company cutting about $2 billion worth of total debt and adding $2.5 billion in exit financing. This comes on the heels of the sale of its PBM, Elixir Solutions, to MedImpact for $575 million earlier this year. Danam Health announced its acquisition of Wellgistics, a 50-state FDA licensed and NABP-accredited pharmaceutical wholesaler distributor. This has proved to be a busy year for the company after having acquired Wood Sage (which included the DelivMeds Tech & Hub platform, and Community Specialty Pharmacy, LLC) back in June and its upcoming public listing on Nasdaq.
Pharma
Based on a PwC midyear report, deal volume in the pharmaceutical and life sciences industry had seen a 20% uptick in the course of the preceding 12 months, largely attributable to dealmakers growing more comfortable with uncertainty. PwC likewise predicted that deal activity would remain strong in the second half of 2024 despite continued headwinds. The mega transactions in the sector in Q3 appear to support that prediction. In August, Eli Lilly and Company (NYSE: LLY) announced it had completed its acquisition of all of the outstanding shares of Morphic Holding (Nasdaq: MORF), a biopharmaceutical company developing oral integrin therapies for treatment of serious chronic diseases, for $3.2 billion. That same month, AbbVie (NYSE: ABBV) announced it had completed its acquisition of all of the outstanding shares of Cerevel Therapeutics (Nasdaq: CERE) for $8.7 billion. As economic conditions continue to improve, deals like these are a certainty to continue.
Conclusion
Q4 will no doubt be an interesting period in the healthcare M&A industry. There are indeed tailwinds that could propel the volume of deal activity higher and in this environment of positive economic developments limited partners of PE funds will surely encourage and even expect their capital will be put to work. However, the net impact of these developments may be tempered by ongoing geopolitical uncertainty and changes in fiscal policy following this November’s presidential election. In our next report we will know the outcome of that election and perhaps have more visibility into what 2025 holds in store.