Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Blogs
    • AI
    • Deals
    • Layoff Tracker
    • HIMSS 2023
  • Opinion
    • Breaking Bias
    • Commentaries
    • Letters
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - AI and Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Sponsored Video Series - One on One
    • Sponsored Video Series - Checking In with Dan Peres
  • Data & Insights
    • Data & Insights Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Mergers & Acquisitions
March 14, 2022 05:01 AM

'SPAC frenzy' has cooled in healthcare

Alex Kacik
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    YIR_finance.png
    MH Illustration

    The wave of shell company-led healthcare acquisitions has ebbed as valuations have dropped and financing has dried up.

    Special purpose acquisition companies experienced a meteoric rise in 2020, when more healthcare companies turned to these "blank check" companies as an alternative to executing their own initial public offerings. SPACs, which raise money through IPOs and use it to acquire other companies and take them public, were involved in 119 deals across all sectors in the third quarter of 2020 valued at a cumulative $40 billion, according to consulting firm RSM's analysis of Bloomberg data.

    So far this quarter, there have been 25 SPAC-led transactions valued at $4.1 billion, down from 437 deals worth an estimated $129.6 billion in the first quarter of 2021.

    "The SPAC frenzy has really cooled, but it still brought public equity markets to healthcare," said Matt Wolf, director and senior healthcare analyst with RSM. "We have seen the crest in SPAC activity so to speak, but it's not going away."

    SPACs have attracted biotech, digital health and provider organizations that want to get to the public market quicker, while retaining a stake in their business and gaining access to liquidity. Traditional IPOs require companies to pitch sales presentations to a variety of potential investors, whereas SPAC-related transactions only require the convincing of one party.

    "The SPAC frenzy has really cooled, but it still brought
    public equity markets to healthcare." 


    - Matt Wolf, director and senior healthcare analyst with RSM

    The due diligence of the SPAC process is not as rigorous as a traditional IPO, some financial experts who question SPAC's transparency say.

    Companies can lose out on networking opportunities if they go the SPAC route. There's also more vetting in the IPO process, said Cody Powers, a principal at ZS Associates.

    "That vetting process from an equity-value standpoint means you are less likely to see a precipitous drop off in the offering. A company is worth however much a SPAC says it's worth—there's not as much of a data sample," he said.

    Download Modern Healthcare’s app to stay informed when industry news breaks.

    Senior primary care provider Cano Health, for instance, was valued at $4.4 billion when it went public last year via a SPAC. Its value in the public markets has been cut by more than half since, with shares trading at under $6 Friday, down from around $15 in June.

    SOC Telemed, the acute telehealth company, will revert back to a private company once Patient Square Capital completes its purchase, which was announced last month. It went public by merging with a SPAC in 2020.

    "Healthcare hasn't been immune to the poor performance of many SPACs post-acquisition—the market has had some mixed reaction to some of those deals, with Cano being one," Wolf said.

    The SPAC market across all sectors has cooled, according to Jefferies data.

    About three-quarters of the nearly 100 announced deals in 2021's first quarter were valued at more than $1 billion. Only one of the announced nine SPAC deals in February carried that price tag, according to Jefferies.

    Tech valuations have been shrinking over the few months and financing has tightened, analysts noted.

    The number of SPAC cancellations has spiked in recent months, tallying more than 20 from the third quarter of last year through mid-February, Jefferies data show.

    "That means these companies don't have all the financing they need for clinical trials. It could have a bit of stigma effect," Powers said. "It may have made more investors wary, which has been borne in deal volumes falling."

    The number of SPAC cancellations has spiked in recent months,
    tallying more than 20 from the third quarter of last year through mid-February,
    Jefferies data show.

    The SPAC market is expected to rebound, but the number of deals and estimated value will be below 2020 peaks, analysts said.

    Biote, which helps bring patients' hormone levels back to normal levels, opted to take the company public through Haymaker Acquisition Corp. III after meeting with about 35 SPACs last year.

    While the path to the public markets wasn't quicker or easier via a SPAC, its leaders' governance and operational expertise drove Biote's decision to partner with Haymaker, said Marc Beer, chairman of the board at Biote.

    "We didn't accept the highest offer—we had a (letter of intent) of a couple million more. We wanted the best partner to build the company," he said. "The leadership at Haymaker knows more about consumer scaling than those of us in the company."

    Beer was bullish on the SPAC market in healthcare, but only for the right company.

    "If a company looks at a SPAC process as a lower bar to go to the public markets than through a traditional S-1, I think they will feel the headwinds and capital market pains after they get through the gauntlet of the SEC," he said.

    About 52 SPACs are looking to make a healthcare acquisition, according to RSM's analysis of public offering filings.

    Large private-equity backed provider platforms, including some in behavioral health, that could still be interested in a SPAC-sponsored public offering, Wolf said.

    "Healthcare is a $4.1 trillion industry that consumes 20% of the U.S. GDP and is extremely fragmented," he said. "The pandemic has pulled forward incredible change and realignment in healthcare—investors want access to that. Once a private-equity backed platform gets to about $300 million to $500 million in revenue, there is someone in their ear about a SPAC or traditional IPO."

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    handshake deal
    Sutter Health plots expansion with purchase of Sansum Clinic
    FTC healthcare
    LCMC, HCA notch win against feds in acquisition case
    Most Popular
    1
    Centene to lay off 2,000 workers
    2
    How health systems are battling price-gouging allegations
    3
    Senate advances bill to temporarily aid hospitals, health centers
    4
    Elevance, Blue Cross Louisiana halt $2.5B proposed deal
    5
    Tower Health to sell urgent care centers, close others
    Sponsored Content
    Modern Healthcare Alert: Sign up for this breaking news email to be kept in the loop as urgent healthcare business news unfolds.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Help Center
    • Advertise with Us
    • Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Blogs
      • AI
      • Deals
      • Layoff Tracker
      • HIMSS 2023
    • Opinion
      • Breaking Bias
      • Commentaries
      • Letters
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - AI and Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Sponsored Video Series - One on One
      • Sponsored Video Series - Checking In with Dan Peres
    • Data & Insights
      • Data & Insights Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing