Q3 2023 Market Update – M&A Activity & Investor Appetite Demonstrate Continued Resilience

Q3 2023 Market Update – M&A Activity & Investor Appetite Demonstrate Continued Resilience

Healthcare services transaction volume exhibited a modest uptick compared to the previous quarter. Macroeconomic headwinds, including restrictive lending markets and inflationary wage pressures, have led to turbulent economic conditions impacting deal activity in all sectors. Nonetheless, healthcare services deal flow remained robust, primarily due to sustained demand for services supported by a host of shifting demographic trends seen nationwide and a sustained focus on sectors best positioned for value-based care. Specific verticals, such as cardiology, home health and hospice, pharma services, primary care, and rehabilitation, have experienced increased deal volumes compared to the broader industry given strong investor appetite.

Transaction volume among strategic acquirers increased compared to the previous quarter, with several groups executing organic growth strategies in conjunction with M&A initiatives. Acquisition criteria among strategics is becoming more concentrated on expanding technological capabilities, increasing patient catchment in differentiated end-markets, and building regional density. New private equity platform activity experienced a downturn from the previous quarter, with most transactions focusing on add-ons in existing regions rather than embarking on new portfolio company formation. Considering the volatile macroeconomic landscape, platforms have adopted a more selective approach to their partnerships, emphasizing the necessity of adding value long-term before making any investment commitments.

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