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M&A

Health care M&A activity continues to soar in 2015

With plans to have 1,500 clinics by 2017, CVS’ deal with Target will allow the company to expand to into new markets such as Seattle, Denver, Salt Lake City, and Portland.
Increased investment in the health care industry is likely to be seen among private equity and venture capital firms.

CVS Health and Target announced on Monday, June 15, that they have a made a deal for CVS to acquire Target’s pharmacy and clinic businesses for $1.9 billion.

According to CNN Money, CVS is rebranding the 1,660 pharmacies that Target operates within its stores in 47 states as well as over 80 clinics as MinuteClinic.

With plans to have 1,500 clinics by 2017, CVS’ deal with Target will allow the company to expand to into new markets such as Seattle, Denver, Salt Lake City, and Portland.

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In light of this event, the strategic advisory and investment banking firm Hammond Hanlon Camp LLC (H2C) released the Merger and Acquisition Trends in Healthcare Services report.

According to the report, health care mergers and acquisitions reached an all-time record-high value of $388 billion in 2014, which was over $136 billion higher than 2013 levels.

Among the industry’s service sectors, long-term care and hospitals were leaders in terms of number of transactions and value over the past two years.  Continued impact of the Affordable Care Act (“ACA”), cost pressures, and access to capital and patient sources were key drivers of hospital merger and acquisition activity.

“Mergers and acquisitions remain a key avenue by which many organizations are responding to trends and pursuing growth,” said Michael Hammond, H2C Principal, in an issued press release. “Furthermore, creative partnerships are becoming a vehicle in regional markets that have reached saturated consolidation and concentration.”

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The outlook for health care M&A activity in 2015 and beyond remains strong, according to H2C, with the impacts of reimbursement changes, price transparency, technology costs, competitive pressures of ACOs/ health exchanges, and need for efficiencies continuing to fuel transactions.

Increased investment in the health care industry is likely to be seen among private equity and venture capital firms, especially within technology and specialty sectors that can be aggregated for future sale. Those companies that demonstrate capabilities that improve quality, patient satisfaction, cost efficiency, and utilization of “big data” to drive performance will be in high demand.

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“The rising use of technology and ‘big data’ in all aspects of delivering care will have a transformative effect on health care cost, quality, and convenience factors, influencing future M&A trends,” said Bill Hanlon, H2C Principal.

To learn what else H2C has to say about the future of health care M&A activity, visit them online

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