Resource Center better insights

Print Divider Print Divider Branding
 

Study reveals one driving force behind Nashville's health care deal craze

01/25/2019

Share

Social Logo Social Logo Social Logo Social Logo

By , Reporter, Nashville Business Journal

Nashville’s health care industry has had two busy years of merger and acquisitions activity, and the sector’s increasing demand for technology solutions may be why.

More than 58 percent of health care executives say technology is their primary solution to business challenges, according to LBMC’s 2019 Business Outlook Report. About 18 percent of those executives are open to making acquisitions in the new year.

Lisa Nix, leader of health care transaction advisory services with LBMC, said those statistics correlate with what the firm is seeing in their local M&A practice. She said LBMC saw a spike in health care IT transactions last year, as well as a 30 percent increase in health care M&A overall in 2018.

“Companies want to drive efficiency through their technology,” Nix said. “There are more opportunities in health care to use big data more effectively and it’s not as cost prohibitive as it once was.”

Nix said her firm has also seen an increase in dental and behavioral health transactions.

The report polled more than 300 executives across multiple industries on their business expectations for the new year. Topics included expected revenue, hiring, capital spending and growth. 

While LBMC provides services to health care clients in 44 states, more than 75 percent of the study’s respondents were headquartered in Nashville.

Nix said the increase in health care IT deals has been fueled by consumer demand for the technology and concerns from executives over cybersecurity. Her practice has also seen a larger emphasis from buyers and sellers to speed the pace at which deals get done.

“It’s just a way of making sure the deal’s value stays in place,” Nix said.

Nashville ranked No.5 in terms of the overall value of M&A deals closed since 2015, according to a report recently released by financial market analyst and research firm Mergermarket, with $30 billion of transactions.

More than half of the value of Nashville deals in the last three years came from two mega-transactions in 2018. In October, Envision Healthcare Corp. was purchased by private equity firm KKR for $9.9 billion, followed by LifePoint Health, which was bought by Apollo Global Management for $5.6 billion and merged with RCCH HealthCare Partners in December

Nix said she expects the high rate of health care M&A to continue in 2019. Just two days into the new year, Maryland-based Omega Healthcare Investors announced plans to purchase Nashville-based MedEquities Realty Trust Inc. for an enterprise value off $600 million and earlier this month Nashville-based HealthStream said it was buying health care training company Providigm in an $18 million deal.

LBMC’s report indicates that health care executives are optimistic overall that 2019 will be a successful year with more than 90 percent anticipating a revenue increase and 29 percent expecting to spend capital on new locations or facilities.

Originally Posted in NBJ.