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Provident Healthcare Partners Provident Healthcare Partners

Q2 2024 Healthcare Services Private Equity Update

Provident Healthcare Partners
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Q2 2024 Healthcare Services Private Equity Update

General: Transaction activity across healthcare services remained strong in Q2 2024 and exceeded deal volume in Q2 2023 but remained below the peaks the market experienced in 2021 and 2022. Pockets of healthcare services are performing better than others, for example, outsourced pharmaceutical services and life sciences deals continue to lead transaction volume as competition for innovative and unique assets remains strong. While multi-site and PPM volumes have dipped from prior quarters, dozens of deals are still closing every month despite the FTC and other regulators closely watching roll-ups. Additionally, the upcoming presidential election does not appear to be impacting M&A activity, however, potential changes to capital gains tax represent significant uncertainty for investors and sellers across the ecosystem. If there is a threat to increase long-term capital gains, we could see many sellers explore the market to transact before any such change takes place. That said, investors seem to be more focused on macroeconomic conditions such as inflation, interest rates, and negative economic growth. Lastly, many PE-backed platforms have pumped the brakes on M&A for a host of reasons, opening the door for other PE funds to opportunistically enter the sector and over-equitize a deal.

Valuations: In the face of the macroeconomic and regulatory battles, valuations have remained fairly stagnant the last few quarters, and Q2 2024 was no different. The sectors that have seen the biggest retreats are behavioral health, home health, and value-based care assets. High-quality assets are still demanding premium multiples, including pharmaceutical and life sciences services, as the market is experiencing a supply and demand imbalance for highly unique, A+ assets.

Exit Activity: Although PE exit activity is not as robust in 2024 as some anticipated, there has been more confidence in the market, as illustrated by the three transactions below. The traditional LMM exit playbook comprises passing platforms upmarket to larger PE firms, however, the bid-ask spread for these assets is slightly more apparent at this level than founder and entrepreneur backed businesses looking to transact.

To print and download the full Healthcare Services Private Equity Update report, please click below…

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