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Advisors, Business Owners, Buyers
Healthcare Market Outlook: Insights From Axial’s Top Dealmakers
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We recently released the 2024 Top 50 Lower Middle Market Healthcare Investors & M&A Advisors. This list showcases Axial’s 50 most active and sought-after members who have specialized in healthcare transactions over the past 12 months.
To better understand the current healthcare trends and challenges, we asked these featured members to share insights on the general industry landscape, business owner mentality, and key sub-sectors, including:
- Services
- Retail
- Manufacturing
- Distribution & Wholesale
Today, we’re sharing these dealmaker insights along with some healthcare-focused M&A deal activity from the Axial platform.
Survey Respondents
Firm Size
Firm Type
Healthcare Deals Closed L12
Healthcare Deals By Sub-Sector 2022 – 2024 YTD
Source: Axial Platform Data
The Services and Retail sub-sectors have remained relatively consistent across all three metrics this year, with Retail continuing to yield the lowest pursuit rate across all healthcare sub-sectors. Distribution & Wholesale has experienced steady revenue and EBITDA growth in 2024 but with a noticeable drop in the pursuit rate, indicating reduced investor interest despite revenue increases.
Overall, the Manufacturing sub-sector shows the strongest year-to-date performance, with significant revenue and EBITDA growth and the highest pursuit rate among the sub-sectors.
Challenges & Opportunities
Where are the biggest challenges in the healthcare industry right now?
| Healthcare Challenges |
|---|
| Challenges from margin compression and misguided regulation. Matt Searles, Merritt Healthcare Advisors |
| A significant challenge in healthcare is managing interest rate risk and sourcing capital to finance acquisitions Rob Chepak, TREP Advisors, LLC |
| There are so many types of buyers that business owners need to understand early on in buyer conversations who they are talking to. This can be difficult and time consuming for a business owner. Bill Schloth, ASA Ventures Group |
| Depends on the sector but generally, staffing followed by reimbursement challenges and opportunities. Jonathan Sadock, Paragon Ventures |
| Government regulations are making it harder to close deals. Eric Coonrod, Integral Capital Advisors, LLC |
| There are significant regulatory issues, pricing issues, and fraud that are negatively impacting the industry at large. Brad Smith, VERTESS Healthcare Advisors |
–
Where are the biggest opportunities in the healthcare industry right now?
| Healthcare Opportunities |
|---|
| Home and alternate site care models and technology deployment which supports and provides efficiencies across the enterprise. Jonathan Sadock, Paragon Ventures |
| Health and wellness - moving to proactive care models. Brett Lacher, Latticework Capital |
| There is tons of consolidation of fragmented markets such as in therapy services like ABA, but also have seen success with companies that provide technology services to healthcare facilities to upgrade their tech stack and make healthcare more efficient. A huge opportunity in concierge medicine and home healthcare as well. Bill Schloth, ASA Ventures Group |
| Many sectors are still fragmented and ripe for consolidation. Jonathan Rubin, Westbury Group |
| There is a lot of technological opportunity given the fragmentation of healthcare. There is also room for process improvement in combination with technological advances, like AI. Brad Smith, VERTESS Healthcare Advisors |
| Healthcare remains a highly fragmented and local industry, with consolidation presenting a significant opportunity, particularly in areas less dependent on labor, such as software or tech-enabled services. Vladimir Andonov, Martis Capital |
–
What are the biggest hurdles in closing healthcare deals in today’s market?
Deal Flow & Valuations
Do you anticipate that deal flow in the healthcare industry will stay the same, increase, or decrease over the next 12 months?
Do you anticipate that valuations in the healthcare industry will stay the same, increase, or decrease over the next 12 months?
Which factors do you think will impact healthcare valuations the most during the next 12 months?
| Regulation aimed at curtailing "private equity" investment in healthcare will drive up costs. The government created these conditions for consolidation. They can't expect physicians to stay in private practice and simultaneously take away their only avenue to remain independent which is PE driven platforms. Alternative is hospital employment which by fee schedule definition is far more expensive for consumers. Hospital fee schedules are 2-3x independent physician fee schedules. Matt Searles, Merritt Healthcare Advisors |
| Financial performance, improving margins and reimbursement opportunities. Jonathan Sadock, Paragon Ventures |
| Valuations could be impacted by available leverage, as well as the pricing and terms of debt. Chris Weidenhammer, Tillery Capital |
| Interest rates, state-level policy changes Rob Chepak, TREP Advisors |
| Availability of greater number of sellers in market -- today, mainly clean/grade A companies transact and these command high valuations. At the same time, financing costs should decrease further and dry powder is at near-record highs -- both pushing valuations in the other direction. Vladimir Andonov, Martis Capital |
| Reimbursement rates and the regulatory environment. Jonathan Rubin, Westbury Group |
The Axial Healthcare Top 50
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