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Moody's: Don't expect many large health deals in 2024

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Illustration: Sarah Grillo/Axios

Anyone hoping for merger madness in health care this year will have to defer those dreams, a recent Moody's report suggests.

The big picture: Transformative M&A, particularly in the payer and provider sub-sectors, is less likely given increasing regulatory scrutiny.

Zoom out: Smaller transactions, divestitures and tuck-in acquisitions are likely to dominate the health care dealmaking landscape across sub-sectors.

Zoom in: Moody's expects insurers will continue to pursue vertical integration buys like pharmacy, home health and urgent care — "though the federal government may inject more restraints."

  • Medical device companies will continue to sell select assets this year in a bid to improve margins, while chasing tuck-in opportunities, Moody's says.
  • Health care services dealmaking will stay soft over the next 18 months amid weaker liquidity, strained margins and continually high interest rates.

State of play: The flood of hospital tie-ups isn't expected to slow as both nonprofit and for-profit providers try to increase scale and generate efficiencies.

  • "M&A has become so prevalent among not-for-profit systems that there are fewer opportunities for major systems to expand within a given region, leading them to increasingly move into new markets," the report says.

Yes, but: More states, including Indiana and California, are expanding authority to review hospital transactions, with Washington considering similar action.

What we're watching: Moody's expect large contract research organizations to pick up the pace on acquisitions amid softening organic growth due to tighter pharmaceutical budgets.

  • "Further, acceleration in M&A activity will be driven by successful integrations of several transformative acquisitions executed in 2021," the report says, citing Thermo Fisher's $21 billion acquisition of PPD and Icon's $12 billion deal for PRA Health Sciences.
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