Your Primer to Healthcare Mergers and Acquisitions

Reflections on Healthcare M&A in 2021 and Expectations for 2022

Jan 12, 2022

by Vaughne Glennie

Volume 9, Issue 1, January 11, 2022

by The VERTESS Team

Every January, as we begin conversations with healthcare business owners who are considering the sale of their companies, we are often asked about the previous year's market and what predictions we can offer for the new year.  2021 offered some continuing challenges due to the ongoing global pandemic, but there was still significant activity in healthcare M&A.  While 2022 is still just days old, VERTESS is keenly aware of developing trends that we believe will continue throughout the year. As each VERTESS team member has a long history in specific healthcare sectors, we are reviewing the previous year for each of those sectors as well as some projections for 2022. 

If you'd like to discuss your healthcare market in greater detail with any of our Managing Directors, we have provided contact information for each of them at the conclusion of their comments. 

J. Blake Peart, Managing Director

Ambulatory Surgery Centers / Hospitals / Physician Practices

Prior to joining Vertess in December of 2021, I was an operator in the ASC space with experience in small hospitals and for-profit healthcare education institutions. 2020 and 2021 were volatile years for the healthcare industry primarily due to the inability to project growth and revenue due to lockdowns, limited operating ability, and staff challenges all due to the pandemic and government mandates. My major takeaway from this experience was the adage, “The strong survive.”  Meaning, many small healthcare organizations that were not supported by major backers struggled with daily operations, meeting financial demands, supply chain challenges, and maintaining staff.  

One of the biggest surprises in 2021 for me was seeing the ASC market come to a halt, limiting/canceling surgical cases due to the restrictions on elective procedures caused by lack of PPE’s. These restrictions were extremely inconsistent and based not on the availability of PPE’s and/or hospital admissions, but on geographic decisions made by local politicians. This made it extremely hard for businesses to strategically plan and operate during the COVID storm surrounding them. 

As we enter 2022, the pandemic is falling into our rear-view mirror. Small business owners in healthcare do not want to relive this experience. As a result, owners are looking for strategic partners who will help them mitigate any risk moving forward. All supporting experts have predicted 2022 a huge M&A transaction year. A challenge for owners is the hit in revenue due to the pandemic over the last few years. Many have not only lost revenue but taken on more debt as a result. Staffing these facilities has also become a challenge affecting recovery. The good news is the “COVID Effect” is being forgiven if a strong recovery is demonstrated. Some companies will be less affected by 2020 revenue losses if 2021 demonstrated a strong recovery. Others, however, may need advice on how to maximize revenue in 2022 and revisit the selling option in 2023.

Contact Blake at

David Purinton, Managing Director

Substance Use Disorder / Behavioral Health

Did you sell your SUD treatment or mental health company in 2021? If so, you probably timed the market about as well as the Reddit users who sold their AMC shares last summer. Not only were buyers attempting to catch up on missed acquisition metrics from 2020, but investors contemplating the space before the pandemic were persuaded that: 1) the continued de-stigmatization of mental health and SUD treatment will result in a long-term increased utilization of benefits; 2) Federal and State policies will continue to promote parity for mental health and SUD; and 3) insurance products will be increasingly friendly for these services.

Despite a great M&A environment, 2021 was no joyride for most operators in this space. Many of our colleagues reported closures – and sometimes refunds – from COVID outbreaks, PPE costs that were not reimbursed adequately by their respective States, staffing shortages, sunk costs into new technologies, and more. This all occurred while racial and economic parity initiatives took center stage at the White House, which was great for the industry’s trajectory but difficult under the other pressures felt from the pandemic. The net effect was that, although valuation multiples and deal terms were record-breaking for sellers, lower EBITDAs resulted in only marginally higher net proceeds to sellers compared to 2019.

Moving into 2022, we expect a strong market in these segments of Behavioral Health. With high demand and static supply, we expect above-average pricing and multiple offers for healthy providers running a coordinated M&A process. Net proceeds to sellers should be similar to 2021 if Covid-related revenue losses and expenses subside.

What are buyers looking for this year? Client-centered, locally branded, tech-forward, lean providers that are in-network in saturated geographies. Out-of-network providers in unsaturated geographies should still carefully choose which carriers with whom to pursue an in-network contract, even though it makes them less attractive to buyers at first glance. Think about the movement to value-based reimbursements and population health management: what can you do in 2022 to demonstrate readiness for the change? Lastly, as always, unsolicited offers mean your business is attractive, but be wary of accepting an offer before finding out what the market would perceive as value, which requires a coordinated M&A process.

Contact David at

Alan Hymowitz, Managing Director

Pharmacy / Home Health / Hospice

2021 - The New Normal 

During the last year, we certainly saw some major changes, particularly in the retail pharmacy market. We saw a big shift from standard retail to mail order. This was due to patients not wanting to walk into a retail location, as well as due to a big shift in the role of the pharmacist during the pandemic. The local pharmacy became more of a trusted ally in patients' healthcare. Their role transitioned to the first line in patients' healthcare ahead of their primary care physician in addition to their ability to now give vaccines and take on a more clinical role. We also saw a shortage of pharmacists and more workforce demands. We saw more supply chain issues and drug shortages than ever before. It certainly put a demand on independent pharmacies to rely more on technology and telehealth than in any previous year. It provided an opportunity as well as practice for healthcare companies to respond to future pandemics and disasters.

Home Infusion continues to be one of the most sought-after acquisitions and will continue to be so in 2022. With all the previous large acquisitions by Amazon/PillPak, PantherRx, Avita, and Diplomat for online M&A activity as well as brick and mortar acquisitions, the market will remain strong.

In home healthcare and hospice, we saw an upswing in strategic partnerships especially from PE-backed platform companies due to the political uncertainty and demands for cost-cutting. There was a shift from fee-for-service business models to value-based care. As smaller operators became more comfortable with the new reimbursement model and received COVID relief funds, they looked to sell due to poor cash flow.

The likelihood that the effects of the pandemic are here to stay will continue to put pressure on healthcare companies to rely more on technology and digital health. It will also continue to shift where and how health care is delivered.

Contact Alan at

Rachel Boynton, Managing Director

Human Services / Home Health / Behavioral Health

One of the biggest COVID effects that I have witnessed in the human services/home health space is how tired many owners are. We are seeing many middle-aged entrepreneurs (those people we don’t often see exiting) choosing to exit the space because of the continued challenge to recruit, hire, and retain quality staff to carry out their vision. Many owners have ridden out the difficult COVID months by paying staff to stay on, beyond the “shut-downs.” This has caused some financial difficulties for many but these same owners, who are staying engaged, see a light at the end of the tunnel. I think many people understand that COVID is probably not going to just disappear, so they are adjusting their models, embracing technology, and enabling staff to provide safe support services. States are collectively re-evaluating reimbursement rates, with the understanding of the stresses that organizations are experiencing, and MCO’s are turning towards more community-based supports and services – specifically in the skilled home health areas.

In the M&A world, we are seeing a subtle shift from the prior years' excitement for ASD services into the more broad category of behavioral health and even SUD treatment. This is likely because of the national attention BH is getting with an increase in insurance reimbursements as well as the increase in demand. We are seeing growth in SNF (Skilled Nursing Facilities) that provide inpatient BH services with specialties like SUD or co-occurring diagnosis. Like many other human services industries, we are seeing a move towards consolidation and growth to provide economies of scale and negotiation power. This move towards consolidation has also been seen as BH/IDD and hospital/MCO platform organizations are diversifying their service options by acquiring bolt-ons that differ from their original service options, like adding a pharmacy, DME, or technology platform to provide a value-add to their consumers while diversifying their funding and cutting certain outsourced costs.

Contact Rachel at

Bradley Smith, Managing Director

Durable Medical Equipment / Home Health / Medical Device Manufacturing

The continuing pandemic keeps creating new and unexpected obstacles to overcome. I never expected the supply chain issue to affect the DME/HME market in the way it did and, when Respironics’s recall occurred, it compounded the issue and sent it to a whole different level. The supply chain issue really challenged providers this past year and will be an issue through most of 2022.  Unfortunately, it is clear that COVID is in control of this economy/market and, until we control the virus, it will dictate our business.

The biggest surprise I saw over the last year was a large number of baby boomers finally ready to sell. The pandemic seems to have finally pushed them over the edge, and they are now opting to exit. Surprisingly, I’m seeing a lot of them rollover equity and continue to have a minor role in the business.

The DME/HME market will have further consolidation in 2022, however, more new providers are opening up for the first time than in decades. These new providers are leaner and more nimble than the legacy providers and will force the legacy provider to keep innovating new technology.

For business owners looking to transact, it remains a seller’s market. The balance of supply and demand remains off with much more demand than supply.  My advice for owners who are considering selling is to "Know Thy Self." Know the type of outcome you seeking and go after that. Don’t waste your time entertaining the one-off unsolicited offers, they are more of a distraction that will not yield a great result. If/when you are ready to sell or recapitalize, go all in and run a full process with all the buyers - this will guarantee the best outcome that can be achieved.

Contact Bradley at

Dave Turgeon, Managing Director

I/DD / Traumatic Brain Injuries / Behavioral Health

In 2021, I was surprised by the volume of deals and the continued strength in pricing for those deals.  I was also surprised by the run-up in all asset prices (stocks, real estate, and privately-owned businesses).  Transactions became a little more complicated due to COVID adjustments and their impact on operations.  We've seen far more earnouts than prior to the pandemic.  In fact, some deals have been completely stalled due to labor concerns.

In the I/DD and TBI markets, I had two very interesting developments in the past year. First, it has been amazing how robust the appetite is for buyers and sellers to transact. On the buy side, there’s a record amount of capital and number of buyers chasing deals (this was addressed in my previous Salient Value article). The second surprise is the state of labor in our country. We saw record amounts of turnover, vacancies, and overtime. 

In the I/DD, TBI, and Behavioral Healthcare sectors, the market will become even busier as more deals will get done than in 2022 than any prior year. The amount of “dry powder” or capital seeking investment is at a record number. There is also a record number of buyers that are seeking deals. More NDA’s are being executed and more buyers are looking at each deal.  

In the I/DD space, the factor driving owners to consider selling is the move toward retirement by baby boomers that have been doing this for decades. In other spaces where the owners are more entrepreneurial, the motivation to sell is the high exit multiples and desire to go off and start something else. My advice to owners to owners considering a transaction is twofold. First, you need an advisor to help you with the sale of your business. Second, avoid “brokers” that make promises they just can’t keep. Look into the track records of those you consider using to manage your process.

Contact Dave at

Robert Villalobos, Managing Director

DME / Home Health

The overall market for healthcare M&A in 2021 was very active with both strategic and financial buyers. While we have noticed an impact from COVID on specific verticals, much of the industry saw an uptick in deal flow as well as valuation trends. DME, home care, and hospice acquisitions stayed very strong and this trend is expected to continue for 2022. We are seeing an aggressive acquisition mode for the larger regional and national strategic buyers in these markets. Hospice and home care multiples are at a premium thus driving smaller tuck-in deals for lower-middle market companies. If you're a healthcare business owner looking to exit in 2022 or 2023, the market should yield you a solid transaction. However, it's important to not focus solely on timing the market, make sure you have your "ducks in a row" prior to selling to ensure you can capture the most value for your business.

Contact Robert at

Vaughne Glennie

Vaughne Glennie CM&AA

Director, Marketing + Operations/Partner

In her role as Director of Marketing and Operations, Vaughne oversees and implements marketing and client development programs, both short-term and long-range, as well as directs all areas of VERTESS' expanding operations.  She is a Certified Merger & Acquisition Advisor (CM&AA).  Before joining VERTESS, she had extensive consultation experience in healthcare and international business.  She coordinated and executed healthcare-related contracts for the Department of Defense TRICARE Management Activity, as well as developed and implemented technical projects associated with HIPAA.  Her background also includes international study in Japan where she became fluent in written and spoken Japanese and graduated with honors with a dual Master’s degree in International Relations from American University and Ritsumeikan University.  Vaughne's unique background provides the versatility and sensitivity required for helping clients successfully maneuver through the intricacies of the M+A process.

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