Following a strong year for healthcare and life sciences transactions in 2021, investment professionals expect deal volume to clip along at a steady pace in 2022, despite labor shortages, supply chain challenges and inflation, according to findings in the KPMG 2022 Healthcare and Life Sciences Investment Outlook Survey set for release Feb. 1.
The number of publicly announced senior living and care acquisitions in the fourth quarter of 2021 indicate that the sector is rebounding from the pandemic economy, based on acquisition data released earlier this month by LevinPro LTC. Mergers and acquisitions were at a record high deal total for any quarter, according to the data.
In KPMG’s survey of more than 300 investment executives, 30% of healthcare investors and 40% of life sciences investors said their firms plan to increase deal activity by 10% or more in 2022 compared with 2021. Approximately half of the investors indicated that inflation and the rising cost of capital could affect their companies’ ability to do mergers; another 28% said it will be a major headwind.
“While economic headwinds could always change the course of investor sentiment, it still looks like the strong momentum for deal activity we saw in 2021 will continue throughout all or most of 2022,” said Ash Shehata, KPMG national sector leader for healthcare and life sciences.
Despite challenges posed by the pandemic, deal volume within long-term care went up 28% last year, Shehata told the McKnight’s Business Daily. He said demographic trends will drive the sector moving forward.
“There have been a lot of opportunities for consolidations in the industry. I think that’s something that might be really important, too.” he said. “There are definitely some pretty good opportunities there to find.”
Looking at the 2021 trend, Shehata said, things seem to be shifting more toward home care and end-of-life care, which he said could change the dynamic of residential care to providing more home care-type services within a senior living community or nursing home.
“There are a lot of home health-based personal measures that we’ve observed. On average, we’re starting to see good quality scores,” Shehata said. “Medicare is enjoying the savings that we’re starting to see in that area. I think you’re going to start to see that model designated as a potential nationwide opportunity.”
Small and medium-sized providers still make up the bulk of the market opportunity, he said, adding that investors are “going to be a lot more critical in understanding the graphics and impacts of specific referral patterns” and what business model providers are using.
Overall, Shehata said, senior living and skilled nursing can look forward another positive year. Factors such as the Fed, inflation and the workforce shortage could affect the entire industry, however, he stressed.
