We have been pretty gloomy about the state of the seniors housing market recently. It has not been without reason, with the industry still mired in low occupancy, persistent discounting and labor difficulties, both finding it and paying for it. On top of that, October’s low M&A count (just 24 publicly announced deals) did not make us feel any better. That was true in both the senior care sector and in health care M&A in general.

At the same time, private equity capital keeps pouring into the healthcare services space (including home health care, behavioral health, physician medical groups, etc…), showing us that investors still view the industry incredibly favorably and may keep the deals flowing into 2020. Plus, there is cheap and abundant debt that can fund that growth. However, a lot of variables could indeed stall the M&A market, such as a potential recession freezing liquidity or political ramifications from the 2020 election that could fundamentally alter how healthcare is done, and paid for, in the country. For us, it will be hard to top the 1,912 healthcare M&A transactions recorded in 2018, according to our Deal Search Online database. So far in 2019, as of November 7, we have just over 1,500 publicly announced health care deals, so surpassing 2018’s level doesn’t look likely. But what about the M&A outlook in 2020?

Well, Capital One just released its annual survey of healthcare services executives, and just 14% of respondents expect there to be a contraction in healthcare services M&A activity, up from 10% in last year’s survey. About one-third, or 30%, of executives expect an increase in M&A activity, which is down from 42% in 2018’s survey. So, M&A enthusiasm has been tempered a bit, but not a lot. Indeed, 41% of executives responded that buying or merging with an existing business would still be their preferred growth strategy.

Shifting to the performance outlook of the healthcare services industry, the respondents were more optimistic, with 69% of executives predicting their businesses will perform better compared with the last 12 months, with just 4% expecting a drop. For which sector these executives thought would do the best in 2020, 39% named the physician medical groups sector, with behavioral health and home health care/hospice each getting 19% and 16% of the vote, respectively. Based on which sectors have attracted the most interest from private equity firms in the last year, that seems about right.