Mergers and Acquisitions Mirror Current Market Volatility, Says Kaufman Hall Expert

Merger and acquisition (M&A) activity exhibited a slowdown during the initial quarter of 2025, as highlighted in a publication by leaders at Kaufman Hall, a Vizient company based in Chicago. The report emphasized that the uncertain economic climate and market volatility, influenced by tariffs and potential policy adjustments from the new administration, cast a shadow over decision-making processes in the healthcare sector. The report indicated that only five transactions were disclosed in this quarter, underscoring a general decline in M&A markets both nationally and globally across various industries.

Specifically, the report pointed out that out of the five revealed transactions in Q1, four included financially struggling acquirees. This pattern aligns with the upsurge in financially distressed transactions observed in the M&A activity report issued at the conclusion of 2024. Despite the sluggish start to 2025, the report shed light on the gradual revival of hospital and health system M&A activity since its low point in 2021 when a meager 49 transactions were publicized. The number of disclosed transactions had ascended to 72 in 2024, showcasing a consistent annual increase starting from 2021. However, the abrupt deceleration in Q1 2025, with only five transactions unveiled, highlighted a historical low amidst recent years, trailing even the pandemic-induced low of seven disclosed transactions in Q3 2021 when health system leaders were preoccupied with pandemic-related challenges.

These observed trends prompted Healthcare Innovation Editor-in-Chief Mark Hagland to engage in a conversation with Anu Singh, the managing director at Kaufman Hall renowned for expertise in mergers and acquisitions. Singh provided insights garnered from the latest report during the interview. Offering a broad perspective, Singh discussed the diverse spectrum of heightened activities evident at varying levels. Organizations grappling with financial hardships post-COVID-19 are compelled to seek partnerships as a means of offsetting revenue losses and increased expenditures that surpass their financial capabilities. Conversely, larger organizations with substantial net patient revenue can withstand risks of defaulting on debt due to their strong market position. These organizations, while not necessarily encountering challenges, aspire to expand their capabilities, such as delving into clinical business intelligence or collaborating more closely with payers. Therefore, engaging in partnerships presents an avenue for growth and evolution beyond independent operations.