A view outside the First Affiliated Hospital of Zhengzhou University in Zhengzhou, Henan Province, China, July 4, 2015. (Photo : Reuters)
China's hospital sector is the new focus of mergers and acquisitions in 2015, according to a recently released PwC report.
Forty-eight M&As involving Chinese hospitals were recorded last year, 27 of which were general hospitals, whose total investment amount hit 3.98 billion yuan ($612.1 million).
PwC noted shifting investment trends in China's healthcare industry. Core business areas are now becoming the new center of M&As, which used to be dominated by traditional targets. Core business areas cover rehabilitation centers, hospitals and clinics, while traditional targets comprise of dental clinics and medical examination centers.
The shift mirrors the sharp fall in total investment values for specialized hospitals.
"However, with more capital flowing in, such targets (specialized hospitals) had become scarce, which led to a dramatic drop in investment in 2015," said PwC's Leon Qian. "Also in 2015, general hospitals became the main focus of investment as they yielded stable cash flows and tended to offer the most benefit for new funding."
The audit firm also said that investment deal activities involving public hospitals have increased. The total disclosed deal value for this segment reached about 840 million yuan ($129.29 million).
Meanwhile, investment deal value in private hospitals dropped to 3.94 billion yuan in 2015 despite breaking records a year earlier. This is due to "fewer deals associated with specialized hospitals," said China Daily in a report, citing the PwC study.
Strategic investors from A-share listed companies have also helped boost deal values.
"Strategic investors are looking to explore horizontal integration with A-share listed healthcare companies, including pharmaceutical, medical equipment and healthcare management enterprises," said PwC consulting partner Jin Jun.
"With strategic investors continuing to have a strong interest in the healthcare market and financial investors willing to pour more money into the industry, large-scale deals will likely be made in the near future, including hospital group or standalone hospital acquisitions," said Jin.
PwC noted that M&As in China's healthcare segment will continue to rise, thanks to government reforms and the development of new technologies.
