Navigating the Future: The Surge of Healthcare Transaction Advisory Services

Though deal-making slowed during the pandemic, the high levels of available capital and favorable valuation multiples do not discourage private equity investors and strategic buyers. Long-term care, physician medical groups, home and hospice providers, and behavioral health are the most active sectors.

Simon Joyeux will advise PEs and corporate clients on acquiring and divesting healthcare and life sciences assets. He has extensive pharma, medical device, contract research, and revenue cycle management experience.

The Surge in Transactions

Healthcare transaction advisory professionals are experiencing a surge in demand. Valuation services and strategic M&A support are in high demand as strategic buyers and private equity investors pursue healthcare deals.

Despite the COVID-19 pandemic, accelerated capital gains tax changes, labor shortages, and high valuation multiples, deal volumes have remained above pre-pandemic baseline levels. The trend continues across most segments of the healthcare services industry: long-term care, physician medical groups, home health and hospice providers, and behavioral health care.

Private equity investment drives physician practice management consolidation – particularly in highly fragmented specialties like ophthalmology and dental. The challenge is to identify the best opportunity for growth and value capture, especially as clinicians and administrators fight over arbitrary cuts without the benefit of cost data. Performing a black-box analysis to compare managed care revenue under the cash and accrual basis of accounting can help take some guesswork out of the process. Regulatory compliance review is also critical to avoid financial and legal liability.

Mergers & Acquisitions

Healthcare merger and acquisition activity remained consistent in the first quarter of 2023, with 15 healthcare industry transactions. This slightly decreased from the high of 17 in the fourth quarter of 2022.

Hospital and health system M&A deals reflected a realignment of for-profit portfolios driven by operational and financial challenges such as workforce shortages, rising inflation concerns, and deteriorating hospital margins. The deal landscape also reflected a continuing trend toward cross-regional partnerships.

Successful healthcare companies use creative investment theses to achieve their growth objectives. For example, pharma companies pursued M&A deals to fill their pipelines and boost top-line growth. Healthcare services companies used M&A to add capability, such as Icon’s $12 billion purchase of PRA Health Sciences to expand its clinical development outsourcing offer and Danaher’s purchase of Aldevron to add mRNA manufacturing capabilities. These strategic moves are not without risk and require expert advice to ensure your deal meets its intended objectives.

Private Equity

As healthcare organizations pursue strategic opportunities, they often must acquire or merge with another entity. This requires a thorough valuation and transaction advisory process to avoid surprises.

Private equity has accelerated its incursion into healthcare, with deep-pocketed firms buying eye care clinics, dental chains, physician practices, hospice services, pet hospitals, and thousands of other businesses that render medical care from the cradle to the grave. Federal regulators are almost blind to the impact of these acquisitions, as most fall below antitrust thresholds.

This expansion has some worried that private equity investors’ profit goals will incentivize providers to extend visits and order more costly procedures. The issue has been highlighted by a study that linked private equity ownership to higher prices. Congressional Democrats have sought to require companies to disclose private equity ownership, but Republicans excluded the provision from the recent Healthcare Price Transparency Act. Some state legislators are working on similar legislation. Private equity investors vary significantly in how conscientiously they manage their healthcare holdings, however.


As healthcare organizations pursue strategic opportunities, executing a thorough valuation and transaction advisory process is critical. The right team can identify key risks and ensure the deal fits both parties well.

Performing due diligence in healthcare requires a deep understanding of regulatory compliance, including the Federal Anti-Kickback, Stark, Civil Monetary Penalty, Corporate Practice of Medicine, and False Claims Act laws. A healthcare-focused team can also provide practical data analytics tools to improve operational efficiency, reducing costs and the risk of inaccurate information or missed opportunities.

Providing clinicians and administrators with cost data will reduce the battles over arbitrary cuts by allowing them to understand their impact on outcomes. Activity-based costing, a powerful tool that assigns costs to activities, will help optimize capital allocation decisions and increase profitability. It can highlight inefficiencies, improve profitability and cash flow, and unlock excess capacity. This allows an organization to capture value by attracting new business, creating a virtuous cycle of improved performance and higher ROI.

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