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Jordan Cohen (left) and Robert Slavkin are partners in Ackerman’s Healthcare Practice Group.
Photo: Provided by Ackerman
According to Reuters, global M&A activity fell to its lowest level in a decade in 2023 and is expected to rebound in 2024.
Last year’s deal-making was weighed down by high interest rates, economic uncertainty and regulatory scrutiny, with all but the last factor gradually easing and confidence returning.
why is this important
Robert Slavkin, head of the healthcare practice at law firm Akerman, said he expects deals to start picking up in the second half of 2023. The company’s customers are hospitals and insurance companies.
“In the second half of the calendar year, there was a noticeable increase in the number of transactions,” Slavkin said. “The first six to eight months of this year were slow, but the economy started to pick up in September.”
Slavkin said confidence in the economy is increasing. And predictions of a recession did not occur. This solved my concerns.
Slavkin said these deals are happening more among more established non-private equity organizations in the facility-to-facility type.
He said there are intense negotiations in the insurance industry, such as the recently canceled merger between Cigna and Humana, and that insurers are looking for leverage as well.
Physician groups and surgery centers continue to attract buyer interest, said Jordan Cohen, a partner in Ackerman’s Healthcare Practice Group and chair of the Digital Health Practice Group.
“We’re seeing a lot of practice squad acquisitions,” Cohen said.
The race for urgent care and primary care centers continues, as evidenced by Amazon’s $3.9 billion deal to acquire One Medical. The primary care provider recently announced three new partnerships with Hackensack Meridian Health, CommonSpirit Health’s Virginia Mason Franciscan Health, and the Health Transformation Alliance to access One Medical’s primary care services.
Both Slavkin and Cohen expect to see more M&A in core regions, allowing smaller hospitals to consolidate large numbers around safety principles.
Cohen believes there will be more investment in life sciences and drug development.
Big pharma is expected to continue pursuing mid-sized biotech companies to fill pipeline gaps vacated by patent release, according to a new PWC report. Investor interest in GLP-1 drugs, which are used for diabetes and are in high demand for weight loss, along with a focus on precision medicine are likely to drive M&A activity in 2024 says the report.
Investors are waiting to see “what comes out of the black box,” and AI is also likely to facilitate drug development and other deals, Cohen said.
“The issue is interest rates in 2024,” Cohen said. “We are seeing potential acquisition targets balk at such low valuations. People are not willing to pay abnormal growth rates.”
According to the Wall Street Journal, the Fed has signaled a rate cut in 2024. In mid-December, the Fed said it expected to cut interest rates three times this year.
Another wild card is how a change in government will affect the deal.
Regulation and FTC enforcement have become more aggressive under the Biden administration. Some investors may be waiting until the November election, believing it will be easier to pursue a deal under the incoming Trump administration, Cohen said.
bigger trends
High interest rates, increased antitrust scrutiny, and soaring valuations contributed to the decline in transactions in 2023.
According to the PWC report, transaction value decreased as the majority of transactions were small acquisitions and add-ons rather than large transactions.
Email the author: SMorse@himss.org
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