Companies in the accounts receivables management and healthcare revenue cycle management sectors continue to buy and sell due to rising delinquent debt levels and healthcare costs.

Merger and acquisition activity in outsourced business services remains strong this year, and total deal values through the third quarter exceeded the total amount from fiscal year 2015 by approximately 72 percent, according to ACA International affiliate member company Corporate Advisory Solutions in its latest newsletter.

“The level of interest among both buyers and sellers suggests that this level of activity will continue into 2017,” said Mark Russell, managing partner for CAS, in the newsletter.

Year-to-date deal values through Sept. 30 this year reached $12.03 billion, with 70 deals announced. “Deal value in the third quarter increased approximately 63 percent year-over-year and the number of deals rose 41 percent,” according to CAS.

Merger and acquisition activity continued in the accounts receivable management industry as well.

There were 10 deals in the third quarter with approximately $679 million in enterprise value. “An uptick in M&A activity is driven by motivated buyers seeking market and asset class diversification,” according to CAS.

As in the second quarter, CAS notes that the Consumer Financial Protection Bureau’s proposals for debt collection rulemaking will continue to influence mergers and acquisitions activity. In particular, CAS reports smaller agencies will sell to larger companies with more compliance resources.

“Overall growth in the ARM sector is driven by favorable macroeconomic trends,” according to CAS. “An increase in availability of delinquent debt in the marketplace leads to an increase in outsourcing to debt buyers and collection agencies.”

Healthcare Revenue Cycle Management

Growth in the healthcare revenue management sector also continued in the third quarter.

There were six deals in the sector for about $499 million in enterprise value, according to CAS. “The RCM sector will continue to grow as healthcare costs are expected to increase under the Affordable Care Act,” CAS notes.

Medical service providers are relying on more revenue cycle management support from outside vendors as a result of growing healthcare costs. “Therefore, hospitals and physician practices are outsourcing more non-core RCM services to reduce costs and improve operational efficiencies,” CAS reports. “This trend will become even more widespread in 2017 as costs continue to rise.”

The company also predicts hospitals and healthcare providers will likely combine the outside vendors they use when acquiring other companies.

“Owners should know that there are interested buyers for OBS businesses, and deal value continues to be driven by a consistently growing top and bottom line performance, client stability and diversification, opportunities for future organic growth, scalable and compliant technology and operational systems, and seasoned management and staff in place,” according to Russell.

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