The disclosed value of healthcare corporate M&A grew 31% in 2018 to an all-time high of $435 billion, partly on the back of two megamergers that accounted for about one-third of total value. As price-to-earnings multiple expansion slows and pressure against rising healthcare prices intensifies, we expect public healthcare companies to lean more on acquisitions to grow revenues. Our analysis of total shareholder return for public healthcare companies finds that revenue growth has been the single biggest driver of TSR over the past five-, three- and one-year periods ending in 2018. To maximize the value of M&A in this high-valuation environment, companies will need to craft an airtight integration thesis.
Nirad Jain and Kara Murphy are partners with Bain & Company and coleaders of the firm’s Healthcare Private Equity team.
To maximize value, companies need an airtight integration thesis.