Ankura is pleased to present an overview of healthcare services transactions announced or closed during Q2 2024 in the United States. Total transactions decreased by 2.9%t in the second quarter of 2024 after increasing slightly by approximately 0.4% in the first quarter. Compared to Q2 2023, transaction volumes for Q2 2024 were down by 11.9%.
Four Notable Transactions Announced or Closed in Q2 1
- Fielmann Group AG entered into a definitive agreement to acquire Shopko Optical on June 11, 2024, for $290.0 million, implying a 1.7x price-to-revenue multiple. Shopko Optical operates more than 140 optical retail stores across 13 states.
- Tenex Capital Management acquired Behavioral Innovations on May 31, 2024, for $300.0 million, implying approximately an 18x to 19x price to earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple. Behavioral Innovations provides center-based and in-home autism diagnostic services and applied behavioral analysis across three states.
- Peak Rock Capital entered into a definitive merger agreement to acquire HuFriedyGroup on April 18, 2024, for $787.5 million, implying a 1.9x price-to-revenue multiple and a 9.2x price to earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple. HuFreidyGroup designs, manufactures, and distributes dental products and previously operated as the dental segment of STERIS plc (NYSE:STE).
- Waste Management, Inc. (NYSE:WM) entered into a definitive agreement to acquire Stericycle (NASDAQ: SRCL) on June 3, 2024, for $7.2 billion, implying a 2.6x price to adjusted revenue multiple and 15.0x price to adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple. Stericycle is a premier provider of medical waste and compliance services as well as secure information destruction.
Key Observations
Despite previous optimism that healthcare transaction activity would rebound from the declines seen in 2023, ongoing inflationary pressures delayed the rate cuts expected by investors to be announced by the Federal Reserve. The increased cost of borrowing associated with elevated interest rates continues to pose significant financial obstacles for market participants and likely discourages some potential investors. Healthcare investors, private equity in particular, also continue to face heightened regulatory scrutiny. The Federal Trade Commission held a virtual workshop in March discussing the impact of private equity in healthcare, and a number of states have introduced legislation that would increase regulatory oversight over acquisitions in the healthcare industry.
As shown in the figures below, recent healthcare acquisitions continued to be dominated by three sectors: Professional Services2, Outsourced Services2, and Behavioral Health. The Professional Services sector remained the most active sector in terms of total transactions as a result of continued interest from health system and private equity buyers alike, accounting for 51.2% of total deal volume.
While transaction activity for the healthcare services industry declined overall, certain sectors remained relatively active. The Home-Based Services sector saw a 52% increase in transaction activity quarter over quarter, marking the highest number of announced transactions since 2022. Additionally, the Outsourced Services sector saw total announced transactions increase by 40% in Q2, driven in part by Provana’s acquisition of five revenue cycle management providers in the quarter.
Future Outlook
As we move into the second half of 2024, investors will be closely monitoring the regulatory landscape in healthcare, as well as inflation and interest rates. With inflation tapering to its lowest levels in two years and a recent rate cut by the Federal Reserve, there is a sense of optimism in the deal market. Private equity investors will also keep a watchful eye on new regulatory legislation to gauge its impact on their acquisition strategies. Early indications from a few pioneering states including California and Illinois suggest that state attorney general offices are not planning to be a deterrent to healthcare acquisitions by private equity firms that are not perceived to be anti-competitive. Despite these uncertainties, both private equity and strategic investors are expected to have substantial capital ready to deploy as financial and regulatory conditions become more defined.
About Ankura Healthcare Transaction Advisory Services
Healthcare transactions are inherently complex. With deep industry experience, Ankura delivers insights to make informed investment decisions in mergers, acquisitions, and partnerships.
Ankura’s Healthcare Transaction Advisory team is deeply rooted in the healthcare sector, leveraging extensive industry knowledge and expertise to anticipate critical financial accounting aspects of transactions while also understanding the operational drivers. This enables us to proactively address critical financial accounting aspects and operational drivers of transactions.
What sets us apart is the collaboration between our financial accounting due diligence experts and Ankura's specialized teams in healthcare valuation, healthcare operations, tax, information technology, commercial strategies, and human capital. This collaboration ensures a seamless, integrated reporting process for you, combining diverse expertise to provide a holistic view of every transaction. Our approach guarantees that you receive nuanced, actionable insights in a unified and strategic manner.
With senior deal professionals engaged in every transaction phase, we provide immediate updates on significant deal factors and a dedicated analysis of any critical issues, ensuring a thorough understanding and resolution of underlying concerns.
Connect with one of our Healthcare Transaction Advisory experts to navigate the complexities of healthcare with confidence. Meet our dedicated professionals at the link below and reach out to us for more information.
Learn more: Healthcare & Life Sciences Transaction and Valuation Advisory - Ankura.com
1. Sources: Scope Research Healthcare M&A Volume Database, published by Scope Research; Capital IQ
2. The Professional Services sector includes dentistry, physical therapy, physician practices, urgent care, veterinary, and other clinics. The Outsourced Services sector includes billing, revenue cycle, management services organizations, marketing, staffing, and other services commonly outsourced by medical practices.
© Copyright 2024. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
