Cascadia Capital’s Fall 2021 Healthcare Market & Activity Update

As summer comes to an end and we approach the final months of 2021, Cascadia’s healthcare group would like to update you on activity in the healthcare transaction market and how our team has been able to both serve our clients and grow over this last dynamic year.

Healthcare M&A and Capital Raising

As global economies and markets have acclimatized to the ongoing pandemic, the market for M&A and capital raising transactions has shattered records, both in healthcare and other industries.

From the fourth quarter of 2020 through the first quarter of 2021, aggregate M&A transaction value dropped more than 50% due to difficult winter months during the pandemic. In the second quarter of 2021, deal value rebounded sharply nearly eclipsing the all-time high seen in the fourth quarter of 2019, as larger transaction sizes and optimism in the economy returned.

The healthcare M&A market has been vertical-agnostic, but has favored attractive add-ons such as:

Siemens Healthineers’ acquisition of Varian, which built on their existing partnership called “EnVision” to establish a comprehensive digital, diagnostic, and therapeutic ecosystem for treatment management;
Opportunistic financial sponsor transactions like Blackstone, Carlyle, and Hellman & Friedman’s majority investment in Medline Industries, Inc. (though the healthcare supplies manufacturer and distributor of healthcare supplies will remain privately held and family-led); and,
One Medical’s acquisition of Iora Health, which powers One Medical’s expansion beyond millennials to provide value-based care to adults 65+ enrolled in Medicare Advantage and other at-risk reimbursement models

Similar to the healthcare M&A market, trends in healthcare capital raising have been vertical-agnostic as well, with transactions across sub-verticals including for incisionless surgery (Insightec), data-driven drug discovery for patients utilizing machine learning (Insitro), and rapid diagnostic testing (Cue).

In terms of public market performance, the broader healthcare sector has slightly underperformed the S&P 500 in line with lagging performance by tech stocks, while medical devices and healthcare services have outperformed the S&P 500 by 1-2%.

Supporting Our Clients

Cascadia’s healthcare team has had the privilege of supporting over a dozen healthcare clients in the last 12 months in capital raising, buy and sell-side M&A processes. Eight of those transactions were completed in 2021 alone. To see all of our recent transactions, click here.

Growing Our Team

With all of this activity and the record hot M&A and capital markets, Cascadia has invested in growing and expanding its healthcare team for the benefit of our partners and clients. In June 2020, Managing Director Adam Stormoen joined the team bringing with him 20 years of investment banking experience advising middle market private and public companies. He has brought extensive sector expertise in several critical areas within our practice, including medical devices, medical equipment, pharmacy and imaging. Adam heads up Cascadia’s Minneapolis office.

This summer we were also pleased to welcome Vice Presidents Michael Madden and Vitaliy Marchenko. Michael joins the team in Seattle having previously served as a Vice President on the healthcare team at Jefferies in New York. Michael will serve clients in the medical devices and products sectors, including contract manufacturing organizations, original equipment manufacturers, electronic manufacturing services, consumables, equipment, and personal care products. Vitaliy was formerly a Vice President at Ziegler, and prior to that Edgemont Capital. He is based in Nashville, Tennessee, a market Cascadia intends to spend more time in and grow further. Vitaliy will focus specifically on physician practice management, including women’s health/fertility, behavioral health, and specialty surgical groups such as cardiology, ophthalmology, gastroenterology, oral surgery and others. Additionally, Novan Le will temporarily relocate to Cascadia’s Los Angeles office as part of the Firm’s broader expansion into the California deal market.

Extending Our Geographic Footprint

As the team grows, so does our geographic footprint. We currently have team members in Washington (both Seattle and Spokane), Los Angeles, Nashville and Minneapolis. Each market is home to a multitude of healthcare businesses and represents a natural extension of our healthcare coverage. Having boots on the ground in these locations allows us to be more connected to the strategic buyer and investor ecosystems, and better serve our existing and future clients.

Keeping a Pulse on the Market

Throughout the year, we’ve shared our thoughts on how specific macro and micro trends are impacting M&A and capital markets, as well as specific industries within the healthcare ecosystem. See below for a collection of our most read thought pieces.

Additional Thought Leadership that may be of interest to you includes:

Outlook for 2021 & 2022

Following Labor Day, Cascadia expects a market-wide sprint to close deals before Thanksgiving, with a 2-3 week surge to close deals prior to Christmas and the New Year, in anticipation of potential Federal capital gains tax hikes by the Biden Administration. In the New Year, we expect a dip in deal activity while financial and strategic sponsors digest acquisitions and investments and while Congress and the White House deliberate on potential tax reform.

Staying Connected

You can expect to hear from us again as the year winds down. We have several successful client transactions we expect to share in the coming months, and will continue to share our insights and perspectives on the general market and specific sub-verticals within the healthcare landscape.

In the interim, Cascadia’s healthcare team is always available as a resource should you wish to discuss the topics we’ve covered here or any other healthcare industry subjects. Please do not hesitate to reach out.