Your Primer to Healthcare Mergers and Acquisitions

Reflections on Healthcare M+A in 2022 and Expectations for 2023

Jan 6, 2023

Volume 10, Issue 1, January 6, 2023

by The VERTESS Team

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! 

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

2022 served as a litmus test for healthcare companies as we move to a post-COVID-19 norm. As a result, 2022 defaulted to safe acquisitions to mitigate risk for buyers. This was primarily observed in companies that were affected both positively and negatively by the epidemic. Among these companies, Urgent Care, laboratory companies, revenue cycle management (RCM), and Ambulatory Surgery Centers were most affected. The good news for 2023 is we can now see acquisitions trending through platform consolidation and buyers entering the market more confident and willing to take more risk. The indicator for this change is a heavy interest in strategic buyers looking to add to existing platforms and enhance their portfolio with add-ons, whereas these actions were stagnant in 2022. There is increased interest in RCM companies and Urgent Care centers that were considered a higher risk during COVID due to the risk of future non-reoccurring revenue. Ambulatory Surgery Center management companies are looking to grow exponentially in 2023. This heightened interest can be validated by the increase in their 2023 acquisition budgets. The new target audience for these specific companies will be private equity groups who are still cautious about the risk and acquiring funding while staying competitive with bids. It will be the job of intermediary M+A companies to provide a narrative for sellside opportunities by utilizing 2022 data to justify a meaningful multiple for their client and minimize risk in a now more stable market. 

Contact Blake at

David Purinton, Managing Director

Substance Use Disorder / Behavioral Health

Substance Use Disorder (SUD)

On the heels of 2021, it appeared that sellers of SUD treatment businesses could simply hang a “For Sale” sign outside their window and attract a plethora of eager buyers competing for their business. Indeed, the segment has enjoyed tailwinds from de-stigmatization, telehealth, and reimbursements. While many deals inked in 2021 were able to transact in the first half of 2022, we observed fewer executed LOIs overall and especially in the second half of the year. That may mean the first half of 2023 will be historically poor for closed SUD transactions. Do not despair if you’re planning to sell in 2023: we observe less uncertainty among buyers coming into 2023 and anticipate a slight buildup of dry powder that should result in buyers offering more attractive LOIs to catch up on their dealmaking goals. We will unpack trends in depth in a future article, but for now, expect many existing trends to continue in 2023. Potential new trends include: lower discounts on OON deals if providers are able to collect the majority of deductibles (suggests effective marketing for capacity building plays), highest valuations for adolescent Medicaid programs, and premiums paid for providers experimenting with big data and AI in admissions and treatment protocols. We think payors will soon reward providers for this, although they do not currently. If you get one takeaway from this paragraph: valuations will be lower, but an M&A Advisor who intimately knows SUD treatment – and who is hungry enough to talk with several dozen potential buyers – will be critical to help you attract strong offers.

Mental Health

The mental health segment is likely past the mid-point of its current rollup lifecycle. If its lifecycle was a baseball game, we would be nearing the 6th inning stretch, where buyers evolve their theses to emerging trends. The key word is “nearing.” We’re not there yet which is evident in several new buyers entering the space to roll up remaining outpatient practices. As a result, the incumbent buyers like Thrive, Lifestance, and Refresh will have new competition this year to acquire independent practices. Although the supply/demand curve may suggest this results in higher pricing, the secular headwinds (interest rates and uncertainty) will produce relatively static pricing on these assets. Where we see a major change in 2023 is in the number of small tuck-ins. Providers with over $1.5 million EBITDA are scarce and buyers are already offering LOIs for businesses with as little as $250,000 EBITDA. We also expect two underrepresented segments to rally in the upcoming years: geriatric care and adolescent care, both of which entail operational and existential challenges, and both of which address palpable micro- and macro-trends. Telehealth providers will continue to be in demand, although we observe a trend toward a more-efficacious balance of brick and mortar. The trend we anticipate making more-frequent headlines in 2023 is the integration of phys-med with behavioral health, particularly in the mental health category.

Contact Dave at

Alan Hymowitz, Managing Director

Pharmacy / Home Health / Hospice

During the last year, we continued to see an impact from COVID-19 within the pharmacy industry. Just in retail alone, we saw a big shift in the role of the pharmacist taking on a more primary care responsibility and less counting of pills. The advent of all the vaccines and where care is now sought was another change. Site of care certainly shifted from hospitals, emergency rooms, and physician offices to more remote locations like retail, AIC, AIS, and freestanding Urgent Care/Emergency Rooms. Retail pharmacies have now established primary care clinics staffed by Nurse Practitioners and Pharmacists. Online and internet-based pharmacies continue to thrive during this time. We see large brick-and-mortar companies change their footprint in how care is delivered within the existing space. They are providing more and more specialty drugs than ever before. Retail and Home Infusion have become more hybrid businesses than ever before. Cash only internet businesses are now trying to capture the commercial business by acquiring brick-and-mortar locations in strategic areas of the US. They are having to compete with companies like Amazon/PillPak and Mark Cuban’s Cost Plus. Due to the pandemic, there has been a significant rise in behavioral health. Retail and specialty pharmacies are dispensing more and more injectable psychiatric drugs than ever before, and 340b continues to have a major impact on the industry, as well. Site of care and value-based care will have the greatest changes in the coming year.

Contact Alan at

Rachel Boynton, Managing Director/ Partner

Human Services / Home Health / Behavioral Health

The behavioral health and home health spaces have experienced not only significant challenges but some pretty great opportunities this last year. Direct service providers continue to struggle with the recruitment of staff, especially as the employee pool continues to be competitive. Some states have identified the need to address the growing concern of DSP/tech shortages as base pay increases in other fields, by providing ARPA funds that go directly to staff or increasing reimbursement rates.  Additionally, the continued approval and payment of telehealth has created some real opportunities for expansion, flexible service delivery, and reaching an underserved population for many providers. Telehealth has also provided access to more care providers since therapists or support staff can work remotely- even in different states. There continues to be consolidation in these spaces as strategic buyers look for both horizontal and vertical integration opportunities by increasing their service offerings as well as expanding into different markets.  We already experienced an active Q4 in these spaces so I anticipate a very strong 2023.

Contact Rachel at

Bradley Smith, Managing Director/ Partner

Durable Medical Equipment / Home Health / Medical Device Manufacturing

Based on everything we're seeing in homecare, it seems like 2023 should be a good year for the market. It will essentially look like a return to pre-pandemic normalcy, with some new opportunities and challenges.  

Significant macro conditions are increasingly affecting micro conditions within the homecare market (i.e., home health, hospice, HME, DME). Such macro conditions include inflation, employee turnover, the slowdown of the economy, and even the Russian invasion of Ukraine. These and other conditions will contribute to a reduction in the number of home care transactions we anticipate seeing in 2023.  

Buyers and their lenders are more closely scrutinizing seller businesses. We've seen this level of scrutiny pick up as of late and expect it to increase further as we move into 2023 because of factors that include higher interest rates and the tightening of the credit markets.  

Homecare consolidation will continue in 2023 but at a more deliberate pace compared to what we've seen in the past few years. That will be attributable to due diligence taking longer and bankers being more diligent with their scrutiny of deals. There are buyers with a strong appetite for acquisitions, but they are going to be more methodical with those transactions. 

Contact Brad at

Dave Turgeon, Managing Director

I/DD / Traumatic Brain Injuries / Behavioral Health

The IDD industry has gone through its share of change over the past couple of years since COVID first hit.  Transactions became more challenging as buyers struggled with “normalizing” operations and financial results.  Staffing shortages, overtime, clients needing to remain in homes, and PPP loans were all a part of the challenges.  As we come out of this period, buyers still have acquisition growth goals they need to achieve. They have the capital to transact in 2023. At the same time, the role of advisors is changing too. More and more is required in terms of industry expertise and deal experience to first, find the best deal and second, get the deals to close efficiently. 

Contact Dave at

Robert Villalobos, Managing Director/ Partner

DME / Home Health

2022 proved to be slightly more challenging within healthcare transactions overall in the lower-middle market. However, DME / HME and Homecare / Home Health verticals are still active with several key strategic buyers (both national and regional providers) garnering a strong appetite for tuck-in acquisitions. Financial buyers have proven time and again that interest remains high for platform acquisitions in these sectors and I do not anticipate that strategy to alter for the new year. Valuations should stay on trend and continue to give would-be sellers a reason to transact in 2023 as buyers seek new opportunities from sellers who have made significant rebounds post-COVID disruption. 

Contact Rob at

Anna Elliott, Managing Director/ Partner

Health IT / Home care / Hospice

The M+A outlook in healthcare technology and post-acute care verticals in 2022 was expected to remain strong. However, it ended with fewer transactions, at the same time paying higher multiples on the companies that did transact. The decrease can be attributed to the economic uncertainty caused by the lingering COVID-19 pandemic and many other economic effects.

With the continued growth of digital health and telehealth, we expect 2023 to have more consolidation in the healthcare technology and post-acute care verticals as companies look to expand their offerings and gain access to new markets. Additionally, the focus on value-based care and the need for greater efficiency and cost savings will likely drive further consolidation in the post-acute care sector. Private equity firms continue to invest in post-acute and technology transactions as the market stabilizes and the potential for higher returns increases. Additionally, the healthcare industry overall is expected to grow, creating more opportunities for M+A transactions in 2023.

Contact Anna @

Gene Quigley, Managing Director

Durable Medical Equipment / Home Medical Equipment

2022 trends in DME healthcare remained strong, albeit not as strong as 2021, which seemed to be a record year. In 2022 we saw a steady stream of small to mid-cap companies selling to both strategic and financial buyers. Multiples within the clinical categories of disposable medical supply such as Urology, Diabetes, and Wound Care delivered the highest multiples, while other non-clinical categories saw similar multiples as in years past. While the inventory of sellside companies seemed to be lower, competition from potential buyers remained high. Coming off a record year in 2021, we did see buyers being more selective with interest in those verticals that directly aligned with their current business and platforms.  

Contact Gene at

Jonathan Hadley, Managing Director

Medical Device Manufacturing

The past year is what I view as a recovery year in the medical device manufacturing space. Advances made in the space were often overshadowed by the continued challenges lingering from the COVID-19 pandemic that affected new and emerging manufacturers alike. From component shortages to device recalls, it was a challenging year for the medical device market. While many legacy manufacturers struggled, we saw an emergence of new manufacturers entering the space to meet dealers' needs and demands. There were a few major trends I noted over the year. We saw an increase in the use of digital technologies, such as wearable devices and telemedicine platforms. There was also an emergence of connected smart device platforms, enabling everything from dealer tracking of assets and paperless transmission of patient vitals to remote patient and device diagnostics. This year I expect the new manufacturers that have entered the space to continue a path of expanding their portfolio of devices and offerings and to continue to capture market share from the legacy manufacturers. We will hopefully see a continuation of the trend of new technologically-enabling devices entering the market for both in-home and clinical settings. It is shaping up to be a transformative year for healthcare and the medical device market with the result being an increase in the quality of patient care. 

Contact Jonathan 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.

We can help you with more information on this and related topics. Contact us today!

Committed to Constant Improvement?

Subscribe to our bi-weekly newsletter – VERTESSPress

No Spam Ever. We Promise.
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram