Is UNH Overdoing Its Acquisition Strategy?

UnitedHealth Group (UNH:US) recently received provisional clearance from the UK regulators for its EMIS merger deal. The Competition and Markets Authority deemed any competition concerns were not strong enough to warrant an intervention. However, this is only a provisional decision and the results of further investigations on these provisional results are expected to be announced by early October.

A Serial Acquirer

UnitedHealth Group’s recent acquisition record is worth taking a look at. The healthcare services provider spent $4.8 billion on acquisitions in 2021. But since then, it is on an acquisition spending spree. In 2022, the spending increased to $18.04 billion whereas, in the trailing twelve months ending June 30, 2023, the company has already spent over $41 billion on acquisitions. 

UNH has a history of expanding its business through acquisitions. It started over a decade ago when the company started buying smaller companies that would fit into and help streamline its business processes. This unique acquisition strategy has helped it raise its revenues by over $100 billion since 2012.

Now that the firm has doubled down on its acquisitions, it is worth asking the question, is UNH getting too big for its own good? Is it acquiring too many companies too fast? Acquisitions come with their own operations risks and integration challenges, which can be hard to navigate at a bigger scale. 

If one goes by what the analysts are saying, everything looks rosy. 

Lance Wikes of Bernstein Research pins down UNH’s outstanding stock performance over the past decade to two reasons: strategic vision and strategic capital management. 

Ana Gupta at AG Health Advisors rates it as the only stock she would buy if she was ever limited to buying just one stock. 22 of the 25 analysts covering the stock currently rate it as a buy!

How Are the Politicians Responding to the Acquisitions?

With all that positivity around, it comes as a surprise that so many politicians are trimming down their holdings. Are they spooked by the attraction that the recent big-sized acquisitions are bringing? Is there a fear that the company is getting ahead of itself with the pace of its acquisitions? Do the politicians fear that regulatory scrutiny might be around the corner?

Michael McCaul is the biggest seller in the stock this year, selling $362,000 to $930,000 worth of UNH stock YTD. His last buy transaction in the stock came in Jan 2022, which coincidentally was the time when UNH started ramping up its acquisition plans!

Daniel Goldman’s three transactions in the stock this year were all selling transactions worth $80,000 - $200,000.

Jonathan Jackson sold $15,000 - $50,000 worth of stock in February while Scott Franklin sold the same quantity, closing half of his position that he initiated a year before the sale.

All these sales do not necessarily signal doom and gloom for the company, but it is interesting to note that there isn’t any significant buying activity in the stock in the last year or so. In the instances where large buy transactions were made, they were part of a short-term trade that was closed sometime later.

Perhaps the acquisitions are keeping the stock in check. The share price hasn’t gone anywhere in the last 12 months and the stock was last trading at just over $510.