Mergers and Acquisitions in the German Hospital Market – Who are the Targets?

Since the introduction of the DRG system in 2004, the German hospital market experienced a stream of consolidations in terms of mergers and acquisitions, resulting in a decreasing number of hospital owners. In this study, I examine the ex-ante characteristics of hospitals prior to a merger or an acquisition occurring between 2005 and 2010 in Germany, predominantly focusing on the financial conditions of hospitals. The results reveal that hospitals with a higher probability of default and less liquid resources are more often the targets of acquisitions. On the other hand, hospitals with a lower equity-to-assets ratio exhibit a higher probability of merger. This pattern can be explained by different motives and rationales of hospital chains and potential investors.