Healthcare M&A might have bottomed out in the first quarter of 2022 in terms of both deal volume and size, according to a new report.
M&A deals in the health care space have declined steadily since the pandemic began. Up to now, the drop in total deal numbers has been partially offset by the growing percentage of mega deals involving target companies of over $1 billion. But health care M&A might have bottomed out in the first quarter of 2022 in terms of both deal volume and size, according to a new report from financial data analysis firm Kaufman Hall.
Q1 Healthcare M&A Data
There were only 12 reported health care M&A deals in Q1, the lowest total since Kaufman Hall began tracking these transactions back in 2016. There were also no mega deals in the quarter to take up the slack the way there has been since the decline in deal volume began. Thus, in four of the 12 announced transactions, the seller or smaller company (which we’ll refer to as “seller”) had average revenues below $100 million.
Another thing Kaufman Hall found “notable” during the quarter was the high percentage of deals (7 out 12) in which for-profit health systems were the seller; there was only one transaction involving a for-profit acquirer.
Figure 1: Number of Q1 Announced Transactions by Year, 2016 - 2022
In a departure from previous pandemic patterns, deals were also smaller. Thus, while average seller size during all of 2021 was $619 million (a historic high for Kaufman Hall), average seller size was $246 million in Q1 2022.
Average Seller Size ($s in millions), Q1 2022 Compared with Year-End Averages, 2016 – 2021
While the number of healthcare M&A deals has been in steady decline since the pandemic began, more of the deals that have come to fruition have been mega transactions. But the falloff in Q1 2022 involved both deal volume and size. Kaufman Hall predicts that “this quarter’s results will prove to be an anomaly,” noting that “the pandemic has affirmed the imperatives of scale.”
Here’s a summary of the key new M&A diagnostic deals that were announced and/or closed in April 2022:
Mergers, Acquisitions, & Asset Sales
Acquiring Company
Target(s)
Deal Summary
DCN Dx
Biomed Diagnostics
• Price: Undisclosed
• Status: Closed
• Acquisition of microbiological testing products firm expands DCN Dx's reach into the point-of-use testing and sampling market
Fulgent Genetics
Inform Diagnostics
• Price: $170 million cash
• Status: Signed agreement with no closing date announced
• Acquisition of pathology lab expands Fulgent's test menu into breast pathology, gastrointestinal pathology, dermatopathology, urologic pathology, neuropathology, and hematopathology
American Laboratory Products Company
GeneProof
• Price: Undisclosed
• Status: Merger agreement with no closing date announced
• Merger of US producer of novel immunodiagnostic reagents for specialty testing with Czech molecular diagnostics firm to create a global firm with capabilities in immunoassay testing kits, real-time PCR products and automated lab instrumentation
BioMérieux
Specific Diagnostics
• Price: $416.8 million cash and shares, equivalent to 3.3 percent of BioMérieux's $12.63 billion market capitalization as of April 11
• Status: No closing date announced
• Acquisition of California-based developer of Specific Reveal Rapid AST rapid antimicrobial susceptibility test system that delivers phenotypic AST results from positive blood cultures, which seamlessly integrates with BioMérieux's Sepsis Solution
Castle Biosciences
AltheaDx
• Price: $65 million upfront, including $32.5 million cash and $32.5 million of Castle common stock + up to $75.0 million more in cash and common stock based on milestones tied to expanded payor coverage for IDgenetix
• Status: Expected to close in Q2
• Acquisition of molecular diagnostics firm specializes in mental health pharmacogenomic testing, including IDgenetix test assessing pharmacogenomic loci associated with response to drugs for depression, anxiety, and other mental health conditions
BioIVT
Tennessee Blood Services (TBS)
• Price: Undisclosed
• Status: Closed
• Biospecimens provider expands capacity, flexibility, and control of its supply of fresh whole blood, plasma, serum, and red blood cell products from healthy donors by acquiring Memphis commercial blood bank
ImmunoPrecise Antibodies (IPA)
ResearchDx
• Price: €20 million ($22.2 million), including €2 million cash and €18 million equity, with €1 million cash at closing, €500,000 held back for 90 days and rest retained for up to 3 years
• Expected to close by April 15
• Acquisition of Belgium-based bioinformatics startup and provider of cloud-based AI system for analyzing multiomic datasets for detecting biological signatures
LetsGetChecked
Veritas Genetics
+
Veritas Intercontinental
• Price: Undisclosed
• Status: Closing date not announced
• Acquisition enables LetsGetChecked to add whole-genome sequencing to its at-home diagnostics offering
