Opinion – Marcos de Vasconcellos: Health companies redesign the market in the pandemic with billionaire businesses

Number of oxygen balloons available, ICU vacancies, number of beds… Brazilian hospitals have undergone a true public X-ray since the beginning of the coronavirus pandemic.

When the news exposed these numbers so that the population understands the possible impacts of the waves of Covid-19 and the Public Power takes the appropriate measures, it also ended up allowing competitors and potential buyers to map the health sector, in search of opportunities.

And there were not few, nor small, the businesses originated in the area in the last two years. The movement of mergers and acquisitions has increased the consolidation of the sector, that is, large players buying smaller ones or merging with other sharks, increasing market concentration.

This Wednesday (24), Rede D’Or announced the purchase of the health plan giant SulAmérica, in a “lightning negotiation”. The total value of the deal has not yet been disclosed, but it is a strong candidate for the biggest of the year (and Carnival hasn’t even arrived yet).

In market value, the companies total almost R$ 120 billion. There are BRL 102.2 billion from Rede D’Or and BRL 15.2 billion from Sul América, taking into account its share price this Thursday (24).

In fact, the largest merger and acquisition transaction (called by the acronym M&A) last year was precisely in Health companies: when Notre Dame Intermédica merged with Hapvida, both health plan operators. At the time of the announcement, the companies also had around R$ 120 billion in market value.

Anyone who thinks this is all about the billion-dollar business upstairs is wrong. In 2021, Brazil had more than 240 transactions involving companies in the health, hygiene and cosmetics area, according to TTR, an international publication specializing in M&As.

Now, in January, TTR elected as “deal of the month” precisely the acquisition of the Centro Clínico Gaúcho by Intermédica, valued at R$ 1.06 billion.

And the “downstairs” business is just getting started. The big M&A structurers have said that hospitals with more than 120 beds have already been purchased and now it’s the turn of the smaller ones to sit at the negotiating table.

With ongoing consolidation in the healthcare industry, independent operators have shrunk from more than 5 million beneficiaries in 2015 to less than 4.1 million in 2021, according to analysts at BTG Pactual.

Understanding the consolidation movement is what brings good opportunities for investors. On Thursday, for example, the day after the announcement of the merger with the D’Or network, SulAmérica’s shares soared 15%. Qualicorp’s, focused on plans for companies, also plummeted by around 15%.

In the interpretation of analysts, this happens because Rede D’Or’s option for SulAmérica showed investors that it would be better positioned than its competitors.

Even in the midst of a pandemic, the concentration of the health market draws attention and should be taken into account when defining your investments. The movement of mergers and acquisitions that now reaches the ground floor has the power to redesign the role of players in the area.

It is worth noting that, looking back since December 2019, the shares of health plan operators had a performance below the Ibovespa, the main indicator of our market. In other words, many papers in the area are, as the market says, discounted.