Q2 Market Update: Second Half Positioned for Continued Rebound

Healthcare services deal volume in the second quarter continued to recover to close out the first half of 2024. While financial and strategic investors are evaluating acquisition opportunities through a narrower lens, the market continues to make a rebound from 2023 levels.

Despite increased antitrust concerns and pervasive macroeconomic headwinds, physician practice management and multi-site healthcare operators continue to attract sponsors and strategic acquirers, while outsourced services sectors have garnered increased investor attention. While the 2023 deal downturn generated significant dry powder across active healthcare funds, many sponsor-backed platforms paused or refrained from launching M&A processes, creating a backlog of eventual private equity-backed exits. Similarly, many strategics postponed divesting assets that misaligned with their respective core competencies, all signaling a more active second half of 2024 into 2025.

Amidst market pressures and building exit backlogs across provider services sectors, investors are shifting focus within healthcare to verticals with minimal reimbursement and labor risk (e.g. healthcare IT, clinical research, pharmaceutical services, biotech / biopharma, etc.). Private equity investors once devoted to building PPM concentrated portfolios are leveraging past experiences to expand into these spaces as part of a broader diversification strategy.

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