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M&A activity returning to pre-pandemic levels

The 20 transactions in the quarter represent the highest number since the first quarter of 2020, when the COVID-19 pandemic began.

Jeff Lagasse, Associate Editor

Photo: Martin Barraud/Getty Images

The second quarter saw an increase in merger and acquisition-related transactions – 20 overall, as compared to 15 transactions in Q1. This, according to a new Kaufman Hall analysis, brought Q2 in line with pre-pandemic levels.

That was true not only with respect to the number of announced transactions, but also with respect to the total transacted revenue for the quarter. The average size of the smaller party by annual revenue remained high, although the higher number of total transactions slightly diluted the impact of three "mega mergers" announced in the quarter – transactions in which the seller or smaller party has annual revenues in excess of $1 billion.

The three "mega merger" transactions announced in Q2 include Froedtert Health and ThedaCare, which announced a letter of intent to combine as a single organization in Wisconsin; Kaiser Foundation Hospitals and Geisinger Health, which announced the launch of Risant Health, a nonprofit organization created by Kaiser Foundation Hospitals, with Geisinger as its first member; and BJC HealthCare and St. Luke's Health System, which signed a nonbinding letter of intent to form an integrated, academic, Missouri-based health system.


The 20 transactions in the quarter were the highest number since the first quarter of 2020, when the COVID-19 pandemic began, and were on par with the 19 transactions announced in Q2 2019 and the 21 transactions in Q2 2018. 

According to Kaufman Hall, the momentum is continuing from the end of 2022, when deals began to tick back up to pre-pandemic levels.

The average size of the seller or smaller party, as measured by annual revenues, remained high by historical standards at $664 million. This was down from the record-breaking 2022 year-end average of $852 million, and reflects the impact of a higher total number of announced transactions in the quarter.

With $13.3 billion in total transacted revenue, Q2 2023 was down from the $19.2 billion seen in Q2 2022, but above pre-pandemic levels for the second quarters of 2017 through 2020.

Kaufman Hall continues to see large regional and national health systems – both nonprofit and for-profit – reposition their portfolios through divestitures. Announced transactions in Q2 include Community Health System subsidiaries' sale of the Medical Center of South Arkansas to South Arkansas Regional Hospital (a joint venture between University of Arkansas Medical Sciences and several local not-for-profits); and two sales by Ascension: Ascension Providence Hospital will be sold to the University of South Alabama, based in Mobile; and Binghamton, New York-based Our Lady of Lourdes Memorial Hospital will be sold to the Pennsylvania-based Guthrie Clinic.

The firm anticipates more portfolio optimization from large, multi-market health systems as they look across the geographies in which they operate and determine where scarce resources can be best deployed.


M&A revenues have been climbing since the end of last year, with Q4 2022 transactions pushing M&A revenues to $45 billion for 2022.

In total, there were 53 announced transactions for 2022. Smaller-party annual revenues exceeded $1 billion in more than 15% of the transactions, just below 2021's historic high of 16.3%.

While the number of transactions was a slight increase from the 49 posted in 2021, it's still below pre-pandemic levels. But the combined revenue of the parties in the 2022 transactions resulted in more than $45 billion in total transacted revenue for the year. That's higher than the recent historic high of $44 billion, recorded in 2017 – this despite having less than half of the total transaction volume.

Twitter: @JELagasse
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