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3 Health Care Stocks With M&A Potential In 2018

December 22, 2017 11:26 am
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President Donald Trump's tax reform victory could positively impact the health care sector and fuel a new round of M&A activity, according to one analyst. 

The Analyst

Height Healthcare's Shrey Verma and Andrea Harris.

The Thesis

Corporate tax reform is expected to fuel health care M&A activity in 2018, with a particular emphasis on vertical deals consisting of managed care companies and pharmacy benefit managers, the analysts said in a Thursday reprot. The logic behind the thesis: managed care organizations are likely "betting on reducing spending on hospital care by keeping patients away from the hospital and better managed in the community and secondary care settings."

Managed care organizations are likely to explore acquisition targets in the home health segment, with potential targets including Amedisys Inc (NASDAQ:AMED), Almost Family Inc (NASDAQ:AFAM), and Surgery Partners Inc (NASDAQ:SGRY), according to Height Healthcare. Political and market headwinds for pharmacy benefit managers make them attractive M&A targets as well, the analysts said. 

"We predict hospitals will face difficulty consolidating in response," Verma and Harris said. "As merging health systems become ever larger, we expect significant challenges by the Federal Trade Commission, which could revisit its existing framework for reviewing the anti-competitive impact of mergers involving limited overlapping markets."

Price Action

  • Shares of Amedisys gained 26 percent throughout 2017.
  • Shares of Almost Family gained 22 percent throughout 2017.
  • Shares of Surgery Partners lost 30 percent throughout 2017.

Related Links:

Morgan Stanley: Health Care M&A Means Headwinds For Hospitals

Bank Of America Sees Value In A Humana-Kindred Healthcare Deal

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