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Expect megamergers, larger deals to continue in healthcare: Kaufman Hall

Although there were fewer merger and acquisition deals announced in the third quarter, the total transacted revenue and average seller size by revenue was higher, according to a recent analysis from healthcare consultant Kaufman Hall. 

In the third quarter, there were seven transactions involving 20 hospitals announced. This included two megamergers, in which the smaller partner has annual revenues of more than $1 billion. 

One of the megamergers is the planned combination of Salt Lake City-based Intermountain Healthcare and Broomfield, Colo.-based SCL Health, which would create a 33-hospital system with $11 billion in revenue. 

The other megamerger announced was in Illinois. Evanston, Ill.-based NorthShore University HealthSystem and Naperville, Ill.-based Edward-Elmhurst Health announced plans to merge into a nine-hospital system with $4 billion in revenue, 25,000 employees and more than 300 ambulatory facilities.

Another notable transaction in the quarter was Nashville, Tenn.-based HCA Healthcare's acquisition of five hospitals in Utah from Dallas-based Steward Health Care. 

For the seven transactions announced in the third quarter, the total transacted revenue was $5.2 billion. This brings the total transacted revenue for 2021 through the third quarter to $22.4 billion. The total transacted revenue through the third quarter is nearly the same as prior years despite only having half of the number of deals announced.

Kaufman Hall also found that the average seller size by revenue from Jan. 1 to Sept. 30 was $659 million, more than double the average of $329 million over the past six years. 

"The trend we have seen throughout 2021 — a smaller number of transactions, but a higher level of large and megamerger transactions — is one we expect to continue," Kaufman Hall said. 

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