CVS/Oak Street Deal is Latest Big Merger After Slow 2022

CVS Health Corp. (CVS) will purchase Oak Street Health Inc. (OSH) in a $10.6 billion deal, among the largest acquisitions so far this year following a lackluster 2022.

The drugstore company will pay $39 per share for Oak Street, for an equity value of about $9.5 billion, with the deal expected to close later this year. Oak Street operates a network of clinics and employs hundreds of physicians and nurse practitioners, adding to CVS’s new focus on primary care offerings.

This is the second major acquisition for CVS in several months. The company announced in September that it would pay about $8 billion to buy health risk assessment company Signify Health.

M&A Activity Picking Up in 2023

The Signify deal was one of only a few large acquisitions in 2022. Just over a month into 2023, though, M&A activity is accelerating.

CVS’ purchase of Oak Street is at least the third multibillion-dollar deal discussed in recent weeks. In January, industrial engineering firm Emerson Electric Co. (EMR) reported it would propose the acquisition of National Instruments Corp. (NATI) for $7.6 billion. Just this week, gold mining company Newmont Corp. (NEM) proposed a $17 billion all-stock buyout of Australian rival Newcrest Mining in what could be the largest deal of the year so far.

New Business for Banks

Investment banks are poised to benefit from revitalized M&A deal flow. Last year, as the pace of transactions slowed, Wall Street firms that had been aggressive in hiring early in the pandemic reversed course and prepared to announce layoffs. Goldman Sachs Group (GS), for instance, said in January it would make its deepest headcount cuts in years.

Market volatility and high interest rates hindered M&A last year, but companies have adopted new strategies allowing them to minimize costs and risks in the process. To the extent that these deals still employ big banks, those financial firms could see a boost in business.