Kaufman Hall: Steward Bankruptcy Pushes Up M&A Activity
Twenty-seven hospital merger and acquisition transactions were announced in the third quarter of 2024, the highest Q3 volume seen since 2017, according to the latest merger and acquisition (M&A) report from the Chicago-based Kaufman Hall consulting and advisory firm, published on Oct. 3.
According to Kaufman Hall, “Almost half the activity in the third quarter resulted from the Steward Health Care bankruptcy, including one of four mega-mergers for the quarter. Total transacted revenue for Q3 2024 reached a high of $13.3 billion.”
Kaufman Hall notes that “One of the 11 transactions related to the Steward bankruptcy—Health Care Systems of America’s assumption of operations at eight hospitals in Florida, Louisiana, and Texas—was among the four “mega merger” transactions announced in Q3 (transactions in which the annual revenue of the seller, or smaller party, exceeds $1 billion). The other three mega mergers were:
Florida-based Orlando Health’s announced acquisition of Alabama-based Brookwood Baptist Health from Tenet
Prime Healthcare’s planned acquisition of eight Ascension-owned hospitals in Illinois
The intended combination of South Dakota-based Sanford Health and Wisconsin-based Marshfield Clinic Health System.”
Kaufman Hall experts expect large national health systems to continue adjusting their portfolios to support investments and meet changing community needs. Many health systems are expanding into new geographic areas for opportunities to partner with others.
“While the increasing number of transactions in Q3 2024 is getting us back to a normal level of activity, we are observing various challenges and opportunities in the market,” said Anu Singh, managing director and Mergers & Acquisitions practice leader with Kaufman Hall, in releasing the report on Thursday. “The motivations for entering into transactions and partnerships vary. As we are seeing the number of strategic transactions accelerate, we are also seeing some organizations that face financial challenges are struggling to find a partner.”
The Kaufman Hall experts note also that, “Although there were four mega merger transactions in Q3 2024, the high overall transaction volume brought down the average size of the seller (or smaller party) by annual revenue from an historic high of $984 million in Q2 2024 to $492 million in Q3. As shown in Figure 2, this amount is consistent with recent year-end averages (excluding the very high year-end averages seen in 2021 and 2022).”
Significantly, the Kaufman Hall experts note that, “Underlying the high level of announced transactions in Q3 2024 is a more troubling message: the high level of financially struggling organizations that are having difficulty finding a partner. The Steward Health Care bankruptcy raised the prospect of hospital closures, and state governments in Arizona and Massachusetts expressed gratitude that established health systems in their communities were willing to take on hospitals that needed a partner to survive. There is a much larger universe of struggling hospitals beyond Steward, as illustrated by other Q3 transactions. In most instances, approving a combination—even with a hospital or health system in the same market—is likely to be a better solution than closure.”
The report’s chief author was Anu Singh, with contributions from Nick Bidwell, Kris Blohm, Nick Gialessas, Nora Kelly, Eb LeMaster, Courtney Midanek, Chris Peltola, and Rob Gialessas.
The full report can be found here.
