Noteworthy M&A Transactions - July 2022

AUG 16
July 2022 M&A activity highlighted several compelling themes:
  1. Corporate Realignment in the Healthcare Vertical: Companies across the healthcare ecosystem are re-evaluating their services and beginning to make strategic moves. While some Fortune 500 corporations are carving out capital to enter the arena with a commitment to “reinvent” the industry through mergers, acquisitions, and spinoffs, others are carving-out their healthcare businesses into stand-alone entities. The recent macroeconomic headwinds have slowed down several industries, yet healthcare is projected to grow faster than the rising inflation rates, and according to the Centers for Medicare & Medicaid Services (CMS), annual spend in healthcare is expected to reach $6.8 trillion and remain roughly a 20% share of annual GDP. We are encouraged to see large corporations evaluating their opportunity in the healthcare vertical and making significant commitments to participate in this dynamic market. Success will require ongoing investment of time, capital, and executive attention to evolve solutions to the industry's needs – while a lack of focus and commitment could become a catalyst for future corporate carve-outs.
  2. Heightened Awareness of Behavioral Health: Following the COVID-19 pandemic, symptoms of Mental Health and Substance Abuse (MHSA) are becoming ever more present around the world. Lockdowns, isolation, and remote communication have contributed to a notable increase in depression, loneliness, and untreated mental health disorders, which will continue to have implications on market size forecasts for years. When left untreated, early-stage depression and anxiety can increase the chances of substance abuse, unhealthy eating habits, irregular sleep patterns, and even thoughts of self-harm. It is expected that the behavioral health market will grow to nearly $100B by 2028, according to Fortune Business Insights. This will definitely be a notable theme in the healthcare industry for the foreseeable future.
  3. Interest & Innovation in Orthotics and Prosthetics (O&P): Devices within the Orthotics and Prosthetics ecosystem are designed to improve posture and movement (orthosis) or replace body segments (prostheses) while maintaining mobility and functionality. Many players in the O&P industry are beginning to ramp up R&D and M&A strategies due to the growing geriatric population, increasing prevalence of osteoarthritis, and the need for high strength and low weight devices. A study conducted by Research and Markets projects the global orthotic and prosthetics market will grow to ~$8.6B by 2028 signaling the role that organic and inorganic growth strategies will play throughout the next decade. Specific growth opportunities include technology enabled devices and alternative production methods, including 3D printing (3DP) and fused deposition modeling (FDM). Such innovation within O&P will enable providers to deliver the best possible care solutions and improve outcomes for their patients. 
Several transactions in July align with the highlighted themes:
  • Amazon, the premier online retail enterprise, announced its acquisition of OneMedical, a leading primary and virtual care provider with employee benefits across the country, for $18/share in an all-cash transaction valued at $3.9B. The acquisition expands Amazon’s reach in the primary care space and supports their existing platform Amazon Care. 
  • Hanger, a provider of orthotic and prosthetic patient care services and solutions, announced that it has entered into a definitive agreement to be acquired by Patient Square Capital, a healthcare investment firm. Under the terms of the deal, Hanger stockholders will receive $18.75 in cash per share, representing an approximately 29% premium and a total enterprise value of ~$1.25B. 
  • Francisco Partners announced its acquisition of healthcare data and analytics assets that were part of IBM's Watson Health business. The new company will be called Merative, a data, analytics, and technology partner for the health industry – including providers, payers, life sciences companies, and governments.
  • 3M announced its plan to spin off their healthcare business into a separately traded publicly traded company. The standalone business will focus on wound and oral care, healthcare IT, and Biofarma Filtration. 3M Health Care’s products and services generated over $8B in revenue in 2021, and the standalone business unlocks new growth potentials for both parties.
  • Acadia Healthcare Company, which specializes in behavioral health centers, announced that it had formed a $65 Million joint venture with ECU Health, eastern North Carolina's health system. The new partnership anticipates building a 144-bed behavioral health hospital in the medical district of Greenville, North Carolina.
  • Labcorp, an operator of one of the largest clinical laboratory networks in the world, announced its plan to spin off Covance, a multi-billion-dollar clinical development subsidiary, resulting in two separate publicly traded companies. The original acquisition of Covance in November 2014 was valued at $6.2B.
  • Encompass Heath, the largest owner and operator of rehabilitation hospitals in the United States, announced a spin-off of their home and hospice business. Enhabit is now a completely separate publicly traded entity. This allows both companies to better allocate their resources filling the needs of their customers on both the rehabilitation and home and hospice side of the business.

TripleTree continuously monitors the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and, as always, let us know what you think!
Niko Hereford
Jack Rotermund
Jack Schulz
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