GCG’s Q1 2020 Healthcare Industry Update provides an overview of the latest trends in the sector, including recent performance, valuation multiples and the state of the middle-market M&A environment.
Key findings include the following:
- Q1 2020 saw mostly negative returns in the Healthcare industry and across the broader U.S. equity market from the previous quarter. COVID-19, the recent economic volatility and uncertainty across many businesses and investors has significantly impacted the returns of these public sectors. On a 3-year period ending March 31, the S&P 500 returned 7.6%. Some sectors, over others, in the Healthcare industry exhibited strong performance on a 12-month basis. The industry has been led by the Homecare/Hospice and Managed Healthcare segments, both of which outperformed the S&P 500, with stock gains of 114.9% and 46.3%, respectively, over the past three years.
- Q1 2020 M&A activity displayed a slight decrease in transaction values and volume since the previous quarter. The impact of COVID-19 likely plays a role in slowdown of acquisitions during the end of Q1. Strategic buyers continue to dominate overall deal activity and have sought acquisitions to offset slowing organic growth and to diversify their offerings. The Biotechnology category led activity, accounting for 20.6% of total Healthcare transaction volume. The Medtech sector proved to be an attractive target as well with 17.9% of deal flow.
- Based on a representative set of publicly traded companies in the Healthcare industry, public companies traded at an average multiple of 13.0x EBITDA and 2.9x revenue. Among the sectors, the strongest trading multiples were observed in the Homecare/Hospice and Biotechnology sectors.
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