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A closer look at Universal Health Services’ acquisition activity

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Acquisition activity

Since 2011, the healthcare industry—represented by the Healthcare Select Sector SPDR (XLV)—has seen a surge in mergers and acquisitions (M&A) activity, especially in the outpatient medical market.

The above graph shows the total M&A deal count for Universal Health Services (UHS) and its major competitors, HCA Holdings (HCA), Acadia Healthcare (ACHC), and Tenet Healthcare (THC), from 2010 to 2014 on a year-to-date basis. Universal Health Services and Acadia Healthcare have entirely focused on acquiring behavioral health facilities and psychiatric hospitals. HCA Holdings has also acquired a substantial number of companies in the behavioral space, while Tenet Healthcare has recently been expanding its presence in this sector.

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Major deals

In 2010, Universal Health Services acquired Psychiatric Solutions (or PSI), the largest standalone behavioral health operator, for $3.1 billion. This added 94 facilities spread across 32 states to Universal Health Services’ portfolio. In 2012, the company acquired Ascend Health Corporation, a behavioral health company with nine psychiatric hospitals in five US states.

In 2013, the company acquired Palo Verde Behavioral Health in Tucson, Arizona, from Tucson Medical Center for an undisclosed amount. This acquisition is part of Universal Health Service’s strategy of expanding its child and adolescent behavioral health services in Southern Arizona.

The year 2014 marked the entry of Universal Health Services into the United Kingdom’s behavioral market with the acquisition of Cygnet Health Care, a leading behavioral health provider in the country, for $335.0 million in consideration. In 2014, Universal Health Services also acquired the Psychiatric Institute of Washington in Washington, DC, adding a 124-bed facility, an outpatient treatment center, and three management contracts covering 66 beds to the company’s portfolio.

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