GCG’s Q4 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:
- Q4 2020 saw significant recovery 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 September 30, the S&P 500 returned 35.0%. 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 Acute Care segments, both of which outperformed the S&P 500, with stock gains of 159.0% and 94.0%, respectively, over the past three years. The growth of these sectors is largely driven by the rising geriatric U.S. population and prevalence of chronic illnesses.
- Q4 2020 M&A activity displayed an increase in transaction values and volume since the previous quarter. The impact of COVID-19 is clear and has played a significant role in the slowdown of acquisitions. Strategic buyers continue to dominate overall deal activity and have sought acquisitions to improve access to healthcare, reduce costs and create long-term strategic and operational improvements. The Biotechnology category led activity, accounting for 19.4% of total Healthcare transaction volume. The Medtech sector proved to be an attractive target as well with 18.2% of deal flow.
- Based on a representative set of publicly traded companies in the Healthcare industry, public companies traded at an average multiple of 14.7x EBITDA and 3.6x revenue. Among the sectors, the strongest trading multiples were observed in the Biotechnology and Homecare/Hospice sectors.
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