M&A Update | Healthcare

U.S. middle-market healthcare M&A activity There were 41 reported middle-market 2 transactions that closed during Q1-2018, down from 46 transactions during Q4-2017. Reported closed transactions in Q1-2018 decreased 18.0 percent compared to 50 deals for the same period in 2017. The aggregate deal value of the closed middle-market M&A transactions with reported values was $8.5 billion during Q1- 2018. This is a decrease from the middle-market deal value of $8.7 billion in Q4-2017.

Table 9: Middle-market healthcare M&A activity for transactions closed Aggregate transaction value and number of deals

Number of Deals

$10 $12 $14 $16 $18 $20

120

100

80

60

$18.5

$17.1

$0 $2 $4 $6 $8

$15.3

40

$12.9

$12.6 $11.6 $11.2

$11.8

$11.3

$10.5

$8.9

$8.3

$7.9 $9.1 $8.7 $8.5

Number of Deals

20

Aggregate Transaction Value ($BB)

0

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

As detailed in Table 10 and Table 11, the closed Q1-2018 middle-market transactions with reported deal multiples 3 had higher median revenue and higher median EBITDA multiples than the historic median multiples.

Table 10: Middle-market quarterly M&A TEV / revenue multiples

Table 11: Middle-market quarterly M&A TEV / EBITDA multiples

Median 2.6x

Median 10.4x

4.6

16.8

16.8

14.5

3.3

12.6

12.5

12.2

11.9

2.8 2.8

2.8 2.7 2.7

10.7 9.9

10.2

10.1

2.5

10.1

9.1

2.2 2.3 2.4 2.7

8.5

2.1 2.3

2.0

6.1

1.5

5.0

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

Source: S&P Capital IQ and Baker Tilly Capital research (April 2018) 2 Middle-market is defined as transaction values between $10 million and $1 billion 3 Nine revenue multiples and four EBITDA multiples reported

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