The healthcare industry has experienced its challenges since COVID-19 onset during mid-2020. Practices and service providers have struggled with significant labor constraints, staffing challenges, shutdowns, as well as general macroeconomic challenges including rising interest rates and inflation. While many healthcare companies struggled during 2021-2022, many practices began to turn the corner in 2023 and heading into 2024. Much of the government aid, ERC dollars, and COVID noise has run its course and practices are back to full strength and normal operations.
Given the healthcare sector is back on course we believe 2024 is a great year to sell your practice. Many investors and buyers struggled acquiring a healthcare practice in 2023 for a variety of reasons. Many healthcare companies had significant noise in their financials with potential de novos or add-on acquisitions not ramping up in a normal fashion post-COVID due to stops and starts related to the pandemic and staffing. The debt markets spooked many investors and lenders pulled back on their debt reads, providing significantly less capital to close on transactions. General inflation has impacted the cost of capital for investors and sidelined many acquisitions over the past 2-3 years. Transactions over the past two years include COVID adjustments, run-rate adjustments, earnouts and creative ways to try to mitigate the impact of COVID and one-time adjustments that made transactions very hard to underwrite. Sellers had higher valuation expectations, however, it was difficult to get buyers comfortable given all of the uncertainty and noise in financials. We believe the pandemic craziness and noise have finally fully exited and most practices have a strong last 12 months (LTM) of financials to point to in order to receive a fair and fully valuation for their business.
In addition, dry powder, or the capital that is committed to private equity and larger institutions, remains at all-time highs. As a result, more investors will be ready to dive into the markets in 2024 and be active in acquiring companies. If you are a healthcare business owner that is looking for a transition or open to a potential sale please reach out to our RiverStone Reporting team. We specialize in healthcare services across many niches (dental, orthodontics, home care, physical therapy, dermatology, vision, RCM, podiatry, wound care, fertility, and women's health) and have deep relationships with high-quality healthcare-focused investors. Reach out to our team today to have an initial conversation around your goals and 2024 objectives Eric@RiverStoneReporting.com