Healthcare Services Transactions Update – Q4 2024
Ankura is pleased to present an overview of healthcare services transactions announced or closed during Q4 2024 in the United States. Total transactions decreased by 10.4 percent in the fourth quarter of 2024 after decreasing by 2.8 percent in the third quarter. Compared to Q4 2023, transaction volumes for Q4 2024 were down by 11.7 percent.
Notable Transactions Announced or Closed in Q41
- New Enterprise Associates entered into a definitive agreement to acquire a 66.96 percent interest in NeueHealth, Inc. (NYSE:NEUE) Inc. on December 23, 2024. The proposed purchase would be $7.33 per share, implying a $1.3 billion enterprise value, or a 1.4x revenue multiple. Previously known as Bright Health Group, NeueHealth provides medical care to patients through owned and affiliated clinics and offers integrated technology solutions to partner medical groups.
- Aya Healthcare, Inc. entered into a definitive agreement to acquire Cross Country Healthcare, Inc (NasdaqGS:CCRN) on December 3, 2024, for $618.4 million, implying a 0.5x price to revenue multiple and a 12.1x price to EBITDA multiple. Cross Country Healthcare provides healthcare staffing solutions throughout the United States, including traditional staffing and recruiting, temporary placements, at home care services, and outsourcing services.
- Cencora entered into a definitive agreement to acquire Retina Consultants of America on November 5, 2024, for $4.6 billion, implying an 18.4x price to EBITDA multiple. Retina Consultants of America provides surgical and clinical retinal care services throughout the United States.
- Astrana Health (NasdaqCM:ASTH) entered into a definitive agreement on November 8, 2024, to acquire Prospect Medical Systems from Prospect Medical Holdings Inc. The proposed terms indicate a purchase price of $745 million, or a 0.6x price to revenue multiple and a 9.2x price to EBITDA multiple. Prospect Medical Systems owns and operates physician groups providing services to patients enrolled in managed care programs.
- AdventHealth entered into a definitive agreement to acquire Shorepoint Health System from Community Health Systems (NYSE:CYH) for $265 million, implying a 1.0x price to revenue multiple and a 15.2x price to EBITDA multiple. The acquisition includes two hospitals and related assets in Florida, one of which is indefinitely closed due to damage caused by hurricanes.
Key Observations
The fourth quarter of 2024 saw a continued decline in transaction activity for the healthcare services industry. The number of announced transactions represents the lowest level since the third quarter of 2020. While the Federal Reserve announced a third consecutive rate cut in December, potential buyers continue to deal with inflationary pressures and borrowing costs higher than in recent years. The healthcare industry also saw significant uncertainty with the presidential election occurring in the fourth quarter.
Additionally, healthcare investors continue to face heightened regulatory scrutiny. Private equity involvement in healthcare remained a controversial topic, resulting in another decline in the number of transactions with private equity funding. Beyond the scrutiny of financial sponsors, the Department of Justice (DOJ) and three state attorneys general sued to block United Healthcare’s acquisition of Amedisys, one of the largest home health and hospice providers in the country. Expected to close at the end of 2024, both parties agreed to extend the closing deadline into 2025, likely with the hope that the second Trump administration would adopt a less aggressive approach in its review of mergers.
As shown in the figures below, recent healthcare acquisitions continued to be dominated by three sectors making up 73.2 percent of transactions in Q4: 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 systems and private equity buyers alike, accounting for 55.1 percent of total deal volume.
In the Professional Services sector, the majority of the transaction activity was in Dentistry with 122 announced transactions, and in Physician Practices with 99 transactions. Much of the activity in Dentistry is being driven by Dental Service Organizations (DSOs) acquiring and/or partnering with dental practices, including MB2 Dental (17 acquisitions), GPS Dental (13), and PDS Health (9). While acquisitions in the Physician Practices sector included activity across several specialties, over half of the transactions involved Orthopedics, Primary Care, and Dermatology providers.
Behavioral Health continues to be a more active sector in healthcare M&A with 34 announced transactions (consistent with the prior quarter). However, M&A levels remain well below the levels reached during and immediately following the coronavirus pandemic. After the pandemic, transaction activity for Behavioral Health facilities rose sharply as demand for mental health and substance abuse treatment services increased. However, transaction activity has been on the decline since 2022, and the number of announced transactions in Q4 is the lowest since the second quarter of 2020.
The Distribution and Equipment Services sector experienced a significant jump in the fourth quarter, increasing 31.6 percent over Q3. The growth in M&A activity was primarily driven by the Home Medical Equipment / Durable Medical Equipment and Equipment / Supply Distribution subsectors, including Patient Square Capital’s acquisition of Patterson Companies, Inc. and Cardinal Health’s acquisition of Advanced Diabetes Supply Group. Both transactions indicate enterprise values over $1.0 billion and an implied price to EBITDA multiple over 11.0x, indicating a significant increase over multiples for transactions closed in this sector earlier in the year.
The Hospital sector was relatively active in the fourth quarter with 26 announced transactions, remaining relatively consistent with Q3. Activity continues to be driven primarily by divestitures from operators struggling overall or in certain markets. In particular, the Steward Health Care bankruptcy has led to significantly higher M&A levels for the sector, including separate, multi-site divestitures to Healthcare Systems of America, HonorHealth, and Quorum. In the case of Quorum and Healthcare Systems of America, the Ankura Transaction Advisory team was involved in supporting due diligence efforts for the transactions.
Additionally, Community Health Systems (NYSE:CYH) has continued to divest facilities in certain markets, including two hospitals in Florida and another in Mississippi. Since 2020, CYH has divested nearly 30 hospitals as part of an ongoing effort to reduce leverage. However, while speaking at the UBS Global Healthcare Conference, CFO Kevin Hammons recently indicated his expectation for Community Health Systems to become more acquisitive, pointing to its recent acquisition of 10 urgent care centers in Arizona. Additionally, Hammons noted that CYH is looking to add four to eight ambulatory surgery centers (ASCs) each year in certain markets.3
2024 Healthcare Services M&A Review
Deal activity over the past year has been marked by a sense of uncertainty emanating from several factors, including elevated interest rates, the November election, and heightened regulatory scrutiny. As such, the healthcare M&A landscape saw another year of decline throughout 2024, pointing to a trend that has continued since the high levels experienced in 2021.
Overall deal volume dropped 4.9 percent across all sectors relative to 2023, underscoring the challenges and shifts experienced within the industry. Particularly noteworthy was the Distribution and Equipment sector, which, despite a recovery in deal volumes in the fourth quarter, still saw a 19.8 percent decline relative to the prior year. Professional Services and Outsourced Services, while remaining the two most active sectors, declined 7.8 percent and 27.5 percent, respectively, relative to 2023 levels.
Despite broader declines, certain healthcare sectors saw some growth in M&A activity. While still below the levels seen immediately following the pandemic, Behavioral Health transactions increased 7.5 percent over 2023 and remained an active space for investors. The Managed Care, Specialty Outpatient Facilities and Pharmacy / Infusion sectors also increased 10.6 percent, 14.0 percent and 21.2 percent, respectively, in 2024 relative to 2023. The growth in the Specialty Outpatient Facilities sector, which includes ambulatory surgery centers and diagnostic imaging centers, was driven primarily by national operators and regional health systems seeking to expand their market share.
Future Outlook
Looking toward 2025, healthcare investors will be closely monitoring the cost of capital, economic conditions, and the regulatory landscape. Following the Federal Reserve’s December meeting where rates were cut by 25 basis points, Chairman Jerome Powell stated that further reductions are dependent on declines in inflation. Most economists are now projecting two 25 basis point reductions in 2025, signaling a slower reduction in borrowing costs as was expected earlier in 2024.
Transaction activity will also depend on the Trump administration’s actions at the beginning of his term. President Trump recently indicated that he would “demand that interest rates drop immediately.” Additionally, Trump has been a vocal proponent of reducing the corporate tax rate, which could create a more favorable environment for M&A activity.
Investors will also be closely monitoring the regulatory implications under the second Trump administration. Former chair of the FTC Lina Kahn was a strong opponent of private equity involvement in healthcare. The new administration’s pick for chairman, Mark Ferguson, is expected to be more accepting of M&A activity. Furthermore, Ferguson does not appear as focused on private equity involvement in healthcare as compared to the previous chair. In the FTC’s recent settlement with Welsh Carson over its portfolio company, U.S. Anesthesia Partners, Ferguson voted in favor but issued a concurring statement making it clear that private equity involvement in the case was “irrelevant.”4
Outside the federal regulatory process, various states have continued to introduce or enact legislation increasing regulatory scrutiny. While private equity investors received positive regulatory news at the state level when California governor Gavin Newsom vetoed Assembly Bill 3129 in the third quarter, other Democrat-leaning states have successfully introduced legislation targeting private equity involvement in the industry. For example, Massachusetts governor Maura Healey signed into law House Bill 5159, which expanded the regulation of private equity investments in healthcare.
While potential investors will continue to monitor inflationary pressure and the resulting impact on borrowing rates, we anticipate that the Trump administration’s more business-friendly approach to merger regulation and potential tax cuts will spur more transactions in the industry we expect healthcare M&A activity to be more robust in 2025.
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.
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[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.
[3] Beckers Hospital Review; CHS CFO eyes ‘offensive’ pivot as system nears $1B divestiture goal
[4] Concurring Statement of Commissioner Andrew N. Ferguson; Joined by Commissioner Melissa Holyoak In the Matter of US Anesthesia Partners/Guardian Anesthesia; Matter Number 2010031
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© Copyright 2025. 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.
