Q1’17 Healthcare M&A Roundup

APR 28
In Q1 2017, TripleTree tracked 464 healthcare mergers and acquisitions that were either closed or announced but have yet to close. The number of transactions this quarter is notably higher than the 384 deals we reported on in our Q4’16 M&A Roundup.

The total publically announced transaction value across the 464 transactions was just over $90 billion. Further, the average total enterprise value for the transactions was $621 million, with a median value of $23 million. This large variance was driven by 16 transactions that had a publically disclosed enterprise value greater than $1 billion, summing to a total of just over $76 billion.


Below, we highlight a few of the top transactions by deal size from this past quarter.

McKesson Purchases CoverMyMeds for $1.1B

Target Description
CoverMyMeds provides electronic automation of the otherwise manual and paper-based medication prior authorization process, providing solutions to more than 700,000 providers and pharmacists. The Company’s suite of software solutions allows electronic health record systems (EHRs), health plans, pharmacy systems and providers to initiate, transmit and track the status of prior authorization requests within the clinical workflow. It is the first and only all-drug, all-payer prior authorization solution in the market.

TripleTree Perspective
McKesson’s distribution segment, encompassing its drug distribution business, is a strong source of revenue for the Company, generating $49.4 billion in 2016, up 5% from  2015. The acquisition of CoverMyMeds is beneficial to McKesson in many respects.

McKesson is familiar with CoverMyMeds’ offerings as its RelayHealth pharmacy connectivity network (retained in the Change Healthcare / McKesson transaction) has shared an intimate relationship with CoverMyMeds since 2010. This transaction is an attractive opportunity for McKesson to obtain a robust product set as well as a fast-growing company. CoverMyMeds also provides McKesson the ability to serve a broad spectrum of its stakeholders as the CoverMyMeds solution presents advantages for physicians, pharmacies and drug companies. Its offering allows physicians to achieve greater clinical efficiency, aids pharmacies in dispensing and achieving multi-payer support for authorization and enhances the drug-filling process for drug companies. Additionally, the transaction allows McKesson to improve upon its supply chain and distribution capabilities and further invest in this promising sector.

Following the close of the transaction, McKesson will operate CoverMyMeds as an independent business, similarly as it does with RelayHealth currently.
Optum Acquires Surgical Care Affiliates for $2.3B

Target Description
Surgical Care Affiliates, Inc. (SCA) owns and operates a network of multi-specialty ambulatory surgery centers and surgical hospitals across the United States consisting of over 205 surgical facilities, including both ambulatory surgery centers (ASC) and surgical hospitals, partnering with approximately 3,000 physicians. Annually, SCA and its affiliates serve approximately 1 million patients per year in more than 30 states throughout the US.

TripleTree Perspective
By combining SCA with OptumCare, Optum’s primary and urgent care delivery services business, the combined organization has created a comprehensive ambulatory care services platform that includes primary care, urgent care and surgical care services. Not only does the merger help extend SCA’s network of ASCs and surgical hospitals through additional partnerships with health systems, medical groups and payers, the combination will greatly expand OptumCare’s capabilities in outpatient surgical procedures.

This is not the first time Optum has expanded their services presence through acquisition. In 2015, Optum became the nation’s largest provider of urgent care services through their acquisition of MedExpress, an operator of over 200 full-service neighborhood medical centers providing a broad range of offerings including urgent care, occupational health, and wellness and prevention services. Similar to MedExpress, the acquisition of SCA will allow Optum to continue broadening their ability to improve patient experience, quality and cost of care.
As previously mentioned, Q1’17 saw an increased focus and intensity of M&A transaction activity across the healthcare landscape over the previous quarter. Despite the influx of regulatory and legislative forces currently shaping the U.S. healthcare industry, the market continues to be viewed optimistically and remains and attractive area for investment.
Chris Radford
Annie Paul
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