Forecasting healthcare M+A trends is risky. If the forecast is correct, the masses will gloat that they all thought the same thing. If it's incorrect, you have a published paper trail proving you were wrong — and how wrong you were.

In January, I published a forecast for behavioral health M+A, and it turned out to be spot on. Before I give myself any more pats on my own back, achieving an accurate forecast was fairly simple for these reasons.

At VERTESS, we've seen our number of home health clients increasing throughout 2023. I thought it would be worthwhile to share what we're witnessing and anticipating for this sector as we move into the final quarter of the year and head toward the new year.

Ambulatory surgery centers (ASCs) are a hot commodity. We're seeing an increase in the number of ASCs coming on the market and plenty of interest in high-performing — and sometimes underperforming — centers from the likes of hospitals and management/development companies, and to a lesser extent other ASCs/physicians and private equity (PE) firms. The latter is largely more interested in investing in companies with existing ASC portfolios or medical groups which own and operate one or more ASC. We're also seeing a growing number of PE firms going head-to-head with the large ASC strategic buyers and offering competitive alternatives to these heavyweight managing companies.

As the initial shock of the COVID-19 pandemic began to subside, investing in healthcare went in the opposite direction. We saw and continue to see private equity firms and search funds investing more and more money into healthcare, with no indication that this trend is slowing down.

What's fueling these investments? Where is the money going? How much money is being invested? Let's answer these and other questions about the increase in healthcare investments by looking at eight facts and statistics.

In this article, we delve into the current state of the economy, particularly its impact on the private equity investing and healthcare services M+A sectors through Q2 2023. We are moving through the latter half of the year facing unexpected economic developments, so we will explore how business owners in the healthcare industry can strategically position themselves to make more informed decisions about selling their businesses. By understanding the prevailing economic conditions and taking proactive steps, healthcare business owners can optimize their chances for a successful and lucrative sale in this ever-evolving economic landscape.

In today's ever-changing market, businesses must remain keenly aware of emerging trends and swiftly adapt their strategies. As we enter the midway point of 2023, it is evident that the market is undergoing significant fluctuations driven by macroeconomic forces and evolving financing dynamics. This article aims to illuminate these transformative shifts and provide valuable insights into how healthcare businesses can successfully navigate this dynamic landscape. By gaining a comprehensive understanding of the current market conditions and taking proactive measures to prepare for the future, businesses can position themselves for resilience and growth amidst the uncertainties that lie ahead.

The Centers for Medicare & Medicaid Services (CMS) recently proposed a new rule for home- and community-based services (HCBS) that would make major changes to the way home care workers are compensated under Medicaid. What's most significant about the proposed changes is the requirement that at least 80% of the Medicaid payments for personal care, homemaker, and home health aide services must be directed toward the wages for caregivers.

The M+A industry regularly reminds us that it’s tough to sell any business, including healthcare companies. Published data from the likes of exit planning experts, investment banks, and trade associations suggest that somewhere between only 10-30% of businesses complete transactions.

Why such a dismal success rate? The typical reasons are logical enough: sellers are not emotionally ready to leave their “baby”; poor financials mean there are few interested and qualified buyers; the seller’s local service/product is not scalable; and/or their company is facing unknown risk in an evolving marketplace.

The home medical equipment (HME) industry was long dominated by legacy manufacturers with a high barrier of entry. But over the past few years, we've begun to see cracks in the decades-old status quo emerge. 

It's January, so many of you may be reading this article for guidance on your 2023 M+A plans. Right about now, your internal dialogue may sound like, "I want to retire soon but the economy seems unstable, so why would I sell before it corrects?" Indeed, economic and industry indicators are mixed, almost like an economic whodunnit mystery with fingers pointing around the circle of suspects, all awaiting Sherlock to tell us when to initiate an exit. But if you step back from the scene of the crime, you will notice the partygoers are all buyers and sellers who share the same intention: to complete M+A transactions.

2022 proved to be a year that did not live up to everyone’s expectations. Riding on a wave of furious M+A activity in 2021, the initial optimism was met with bewilderment as buyers became increasingly selective and cautious in the transaction process as they sought to mitigate risk.  Deals that were expected to be straightforward experienced headwinds that led to a less-than-robust conclusion to the year.  Larger global economic issues, the continuing pandemic, and uncertainty in the political sphere undoubtedly influenced the healthcare M+A market.  However, we are already seeing signs of change in 2023. Deal activity is up and buyers still have a lot of dry powder to deploy.  The VERTESS team is pleased to offer its annual year-end review as well as the future outlook for each of the healthcare verticals our Managing Directors support.  We look forward to new challenges and successes in 2023!

It's been a wild ride for M+A activity in the healthcare space these past few years, with several significant global and domestic issues impacting deal flow. The effects of the COVID-19 pandemic will be felt for a long time. Russia's invasion of Ukraine has created global uncertainty. Domestic inflation has created cautious investors. Labor shortages have decreased profits for many providers.

All of these weighed down the healthcare space, yet it's estimated that of the $1.6 trillion in "dry powder" (i.e., unspent capital) globally, 15% is expected to be allocated to healthcare. And of that 15%, I expect a good percentage to go toward behavioral health.

Following the lull of transaction activity that affected all of healthcare in the first several months of the COVID-19 pandemic, the behavioral health space has experienced fairly steady transaction activity, including some large deals that had ripple effects throughout the space.