The difficulties faced by healthcare provider consolidations could be temporary or they could indicate a long-term decline in the attractiveness of consolidation. Some challenges, like high debt and labor market imbalances, are temporary and don’t reflect the fundamental quality of the businesses involved.
On this episode of The Corner Series, McGuireWoods’ Geoff Cockrell is joined by Mark Francis, managing director and global head of healthcare investment banking at Houlihan Lokey. The two discuss the future of healthcare provider consolidations through the lens of those working in the industry right now.
Mark and Geoff talk about the future of healthcare provider consolidations through the lens of those working in the industry. Over the past six to eight months, some larger platforms that were acquiring smaller companies paused their acquisition activities due to a disconnect between seller expectations and current valuations. They also were waiting for more favorable credit conditions and pricing adjustments. Now, these platforms are beginning to look to the market again to see what is available.
Mark and Geoff also discuss the healthcare sector’s resilience during economic slowdowns. Healthcare often is less volatile than other sectors, making it an attractive option for investors looking to allocate funds during economic uncertainties. Healthcare is a mature market, but new interest in private equity has led to a reshuffling of focus within sectors. Some sectors such as healthcare technology, veterinary care and behavioral health remain highly attractive despite varying trends in their valuations.
In addition, Mark and Geoff address valuations and the importance of running and operating integrated businesses. “Great companies get great valuations, and we can debate what great is, but if people don’t feel good about the valuations, largely they’re not trading,” Mark says.