Dealmakers are confidently optimistic about M&A growth in the health care sector according to the latest reading of SourceMedia’s Mid-Market Pulse (MMP). The MMP, published by Mergers & Acquisitions in partnership with McGladrey LLP, is a forward-looking sentiment indicator that monitors near-and intermediate-term outlook for merger and acquisition activity within the middle market.
“M&A practitioners predict significant expansion in health care deals,” said Mary Kathleen Flynn, Editor-in-Chief of Mergers & Acquisitions. “In our second look at this sector, health care remains the strongest of those measured by the MMP, beating industry scores for manufacturing, TMT (technology, media and telecommunications), financial services and energy.”
Dealmakers delivered health care a composite score of 84.1, marking “the highest yielded by the MMP so far,” Flynn said. The 3-month composite score for the overall index was 75.1, revealing a vast margin between the two.
Although the 12-month scores dipped a little, the gap was still broad between health care and the overall index, with scores of 77.3 and 70.8 respectively.
“The slightly less bullish 12-month perspective suggests that dealmakers expect expansion in health care M&A to continue at a slower pace, as the industry’s transformation by the Affordable Care Act lessens over time,” Flynn said.
Each month, the MMP index spotlights an individual industry and presents respondents’ expectations for deal activity within that specific sector. This month’s index focuses on the health care sector.
In the near and intermediate scores, deal multiples in the health care sector outperformed that same component in the overall index. However, dealmakers were clear that they expect less expansion in the 12-month view.
For a complete analysis of the MMP’s most recent data, go to:
Inside the MMP
The Mergers & Acquisitions Mid-Market Pulse (MMP) is a monthly barometer of sentiment in the mergers and acquisitions business derived from monthly surveys of approximately 250 executives in private equity firms, investment banks, lenders, and advisory firms in accounting, law, and consulting.
Based on a regular set of recurring questions about expectations and trends across a range of key issues in M&A, the MMP is a leading indicator for potential changes in momentum in M&A activity. Various indicators that make up the MMP include projected deal volumes and pricing, staffing resource utilization levels, and the expected impacts of economic conditions, taxes and regulatory policy on future M&A activity.
Survey responses describe expectations and outlooks for three- and 12-month forward periods to arrive at indicator scores. Respondents also are asked to elaborate on their responses and provide opinions about other conditions that affect their M&A outlook.
A Look at the Numbers
Deal value in the health care sector outpaced the overall index in the near term scoring 89.4 and 85.9. In the intermediate term, they swapped spots with the overall index at 84 and health care at 80.1.
Deal volume in the near term was one of the only components where health care lagged behind the overall index, with a score of 73.3 compared to 80.4.
What Respondents are Saying
Survey respondents are encouraged to add verbatim comments to their answers. Many said the Affordable Care Act is the biggest factor influencing their outlook.
“Short term, there remains a high amount of uncertainty regarding the future of payments,” one dealmaker said. “However, the continued theme of driving costs out of the system will continue to drive investment in these types of service businesses.”
Respondents said increased deal multiples in the near term are a result of available debt and “private equity investors wanting to push money.” Others said they expect that to change somewhat in the 12-month outlook. “Valuations are extremely bloated currently and will need to reset,” a dealmaker commented.
SourceMedia, an Observer Capital company, is a diversified business-to-business digital media company serving senior professionals in the financial, technology, and healthcare sectors. Brands include American Banker, The Bond Buyer, Mergers & Acquisitions, Financial Planning, On Wall Street, Accounting Today, Health Data Management, and Employee Benefit News.
About SourceMedia Research
SourceMedia Research, a unit of SourceMedia, provides research solutions for marketers, agencies and others targeting business sectors such as banking, payments, mortgage, accounting, insurance, employee benefits and investment advisor / wealth management. SourceMedia Research specializes in reaching senior and C-level decision makers through access to its large proprietary opt-in databases and panels.
About Mergers & Acquisitions
Mergers & Acquisitions covers all aspects of middle-market dealmaking, including identifying acquisition targets, negotiating transactions, performing due diligence, and closing deals. Serving nearly 18,600 print subscribers, our monthly magazine is published in partnership with the Association for Corporate Growth (ACG), a global organization comprised of thousands of private equity firms, corporate officials and intermediaries. With more than 25,000 unique monthly visitors, themiddlemarket.com is continuously updated, providing real-time information and analysis of news and trends in M&A. Our online video series features interviews with high-profile dealmakers, including private equity partners, strategic buyers, investment bankers and other advisers.
McGladrey LLP is the leading U.S. provider of assurance, tax and consulting services focused on the middle market, with more than 7,000 people in 75 cities nationwide. McGladrey is a licensed CPA firm and serves clients around the world through RSM International, a global network of independent assurance, tax and consulting firms. McGladrey uses its deep understanding of the needs and aspirations of clients to help them succeed. McGladrey serves private equity firms and their portfolio companies with integrated transaction advisory, tax, assurance and consulting services. Clients benefit from a single-point-of-coordination service model and teams that operate as strategic partners throughout the private equity life cycle. For more information like us on Facebook at McGladrey News, follow us on Twitter @McGladreyPEand/or connect with us on LinkedIn.
For more information, please contact:
Mary Kathleen Flynn
Executive Director of Marketing