Look for Health Care Mergers and Acquisitions to Resurge in 2021

Last year at this time, the expectation was that 2020 would be an unusually active year for health care mergers and acquisitions. But the pandemic forced deal makers to shelve their plans and await further developments. As the year comes to a close and the COVID-19 crisis comes to what may well prove to be its climax, talk of return to more active M&A deal making has returned.

Ripe Conditions for M&A Deals

In some ways, COVID-19 changed everything, and in other ways, it changed nothing, including the long-term financial factors that made the conditions ripe for M&A deals. Coming up with the capital to make a strategic acquisition will be less challenging in 2021. Liquidity is strong, thanks in part to CARES Act funding that enabled would-be acquirers to build up cash reserves. Low interest rates and the recovery of stock prices will also provide impetus for M&A deal making.

And even as equity value and liquidity burns a hole in the pockets of would-be acquirers, stress, uncertainty of survival and downward pressure on earnings in the health care markets, particularly to small and mid-sized labs and other providers, will also likely ensure a robust supply of acquisition targets. Genomics firms, hospital labs and freestanding test labs are among the candidates for acquisition. Outside the labs space, home healthcare and digital health technology companies that offer remote care management and better clinical outcomes at lower costs, will also generate strong interest.

MERGERS, ACQUISITIONS & ASSET SALES