In the world of healthcare, the past year has seen a strategic interplay of mergers and acquisitions (M&A), leading to substantial shifts that have pushed the sector into a new phase of growth and value creation. Amidst technological advancements and evolving consumer preferences, healthcare companies are rapidly embracing transformative changes.

The Current Landscape

One catalyst driving the upswing in healthcare M&A is the integration of artificial intelligence (AI) into healthcare services. As AI rapidly evolves, its potential to address  challenges in healthcare—such as workforce burnout, improving patient outcomes, advancing healthcare equity, and enhancing financial performance—becomes increasingly apparent. Our recent Colliers Healthcare report delves into the strategic focus areas of industry leaders, revealing four emerging themes that encapsulate their approaches to integrating AI in healthcare.

Moreover, a survey conducted by Jefferies Financial Group sheds light on the forward-looking perspectives of healthcare executives, indicating an  anticipation of increased M&A activity in the global healthcare sector during 2024. Based on insights from 600 senior leaders, the survey showcased that 68% of respondents are poised for a surge in healthcare deals, with 60% foreseeing sector-dominance by companies rather than private equity.

Market Dynamics and Challenges

In contrast to declining M&A trends in other industries, the healthcare M&A volume has witnessed a notable 22% surge, reaching $341 billion this year. However, executives express caution regarding the impact of challenging economic conditions on healthcare companies’ ability to raise capital. Additionally, there is skepticism about initial public offerings (IPOs) driving transactions, with 68% of respondents believing that the economic environment will significantly affect healthcare companies.

“Consumerization” of Healthcare

The trend towards consumerization in healthcare remains a powerful force. This shift is not only evident in the healthcare sector but is also influencing the retail, technology, and consumer packaged goods spaces, where health-related products and services are emerging to cater to individual consumer health needs. One major example of this in 2023 was Amazon’s acquisition of One Medical. Through this strategic move, Amazon has aimed to enhance customer experience by providing access to healthcare services in a more personalized and convenient manner.

Digital Solutions and Emerging Technologies

Digital solutions, particularly in telehealth, health tech, and analytics, remain highly sought after, especially among tech players. Health services companies are anticipated to leverage M&A, partnerships, and alliances to acquire new capabilities and introduce AI-powered tools like virtual assistants and chatbots for personalized health recommendations and appointment scheduling.

An example of this trend is the recent collaboration between Google Cloud and Mayo Clinic. Mayo Clinic is incorporating a new generative AI search tool from Google Cloud, allowing healthcare companies to create personalized chatbots. This technology streamlines the analysis of healthcare data, including patient medical history, imaging records, genomics, or labs, through simplified queries, ultimately boosting efficiency for healthcare workers.

Notable Mergers

One of the standout mergers in the healthcare real estate sector has been between Healthpeak Properties and Physician Realty Trust. The all-stock deal, valued at $21 billion, will create a healthcare behemoth well-positioned to leverage its scale and deliver value-add services in managing  clinics, hospitals, and surgery centers. The merger, expected to close in the first half of 2024, will solidify their presence in key growth markets such as Dallas, Houston, Nashville, Phoenix, and Denver.

As we look ahead, these trends and developments affirm that the healthcare industry is not only resilient, but also poised for continual evolution, marked by innovation, collaboration, and a steadfast commitment to improving patient outcomes. The opportunities for growth, transformative partnerships, and enhanced healthcare solutions are abundant, making the future of healthcare M&A in 2024 promising.