Healthcare merger and acquisition activity has been up and down over the last few years, with activity slow in the first three quarters of last year. However, 2024 will be a "vigorous season for M&A activity in healthcare," according to a Jan. 22 Grant Thornton report.
"2024 is expected to be a very robust season for M&A," said Glenn Barenbaum, co-leader of Grant Thornton's Healthcare Transaction Advisory Practice during an interview posted on the firm's website. "There's been pent-up demand as 2023 was a little sluggish, given high-debt interest rates as well as that value gap between normalized. So, the investment community that I speak to is expecting to have very strong 2024 deal volumes in healthcare."
Physician practices in particular could be hot targets this year as rising costs and flat reimbursements make it harder for independent practices to thrive. Many are looking for ways to consolidate or partner with larger organizations, including hospitals, or take on private equity investment.
As small businesses, the physician offices often are low-tech operations and haven't invested in sophisticated revenue cycle or data gathering platforms, and their billing systems are relatively simple. The buyers may need to invest in technology platforms for the practice to optimize operations.
"If you're a founder-owned physician practice, they might not need the state of the art. But if they're seeking to grow, investments are needed," said Mr. Barenbaum. "I think from a diligence perspective, it's key to understand how the revenue cycle is operating, what the financial results are but, day one, how they can incorporate that into their integration plan and really fuel growth."
Mr. Barenbaum sees orthopedic practice acquisitions as well as interest in behavioral health companies accelerating this year.