Private equity (PE) mergers and acquisitions (M&A) in the healthcare market remained robust during Q3 2024, accounting for a significant portion of overall deal activity. Out of 453 deals during Q3 2024 (as of September 23, 2024), 158 involved PE acquirers and/or their portfolio companies, accounting for 35% of the total deals. This is consistent with the same 2023 period (July 1, 2023 – September 23, 2023), when 162 of 483 deals (34%) involved PE acquirers. However, it shows a slight decline from the same 2022 period (July 1, 2022 – September 23, 2022), when 222 of 575 deals (about 39%) involved PE acquirers. This trend highlights the continued interest and investment from PE in the healthcare industry.
Key Target Sectors and Subsectors
The most active target sectors for PE acquisitions in Q3 2024 included:
- Dental (34 deals): The dental sector remains a prime target for PE activity due to its fragmented market and potential for operational efficiencies. By consolidating practices, PE firms can create larger, more scalable dental service organizations to oversee the portfolio of practices, leading to economies of scale and improved access to care. Additionally, the high prices associated with many dental procedures contribute to the sector’s attractiveness for PE investors. Notable acquirers in this space were Heartland Dental, Dental365, MB2 Dental Solutions and Specialized Dental Partners.
- Revenue cycle management (8 deals): The increasing complexity of healthcare billing and reimbursement has made revenue cycle management (RCM) services attractive to PE investors. These specialized firms help healthcare providers improve their revenue cycle processes, reduce denials and accelerate cash flow. By investing in RCM companies, PE firms can capitalize on the growing demand for these services and contribute to the financial stability of healthcare providers. The largest deal in the RCM specialty during Q3 2024 was the acquisition of R1 RCM by TowerBrook Capital Partners and Clayton, Dubilier & Rice for $8.9 billion.
- Patient engagement (7 deals): The shift towards patient-centered care has made patient engagement solutions a strategic priority for healthcare providers. PE firms are recognizing the value of investing in companies specializing in this area. By leveraging technology and data analytics, these firms can help healthcare providers improve patient satisfaction, enhance adherence to treatment plans, and ultimately improve health outcomes. This focus on patient engagement reflects a broader trend in the healthcare industry towards value-based care and personalized medicine. Some notable PE buyers in the space were SAIGroup and WindRose Health Investors.
Private Equity Deals by Purchase Price
There were only 11 PE deals in Q3 2024 with a purchase price:
| Buyer/Backer | Target | Price | Sector/Subsector |
| TowerBrook Capital Partners & Clayton, Dubilier & Rice | R1 RCM | $8.9 billion | eHealth (Revenue Cycle Management) |
| The Carlyle Group | Baxter International’s kidney care segment | $3.5 billion | Labs (Dialysis) |
| CVC Capital Partners (through CVC Capital Partners Fund IX) | Mallinckrodt’s Therakos business | $925 million | Pharmaceuticals |
| EQT | GeBBS Healthcare Solutions | $870 million | eHealth (Revenue Cycle Management) |
| CorroHealth (backed by The Carlyle Group) | Xtend Healthcare | $365 million | eHealth (Revenue Cycle Management) |
| Astorg | Hamilton Thorne | $282 million | Other Services (Healthcare Product Distributor) |
| Rural Healthcare Group (backed by Kinderhook Industries) | Steward Medical Group & Steward Health Care Network | $245 million | Physician Medical Group (Internal Medicine) |
| National Dental Healthcare REIT (backed by Thurston Group) | 13-property medical outpatient portfolio | $234 million | Other Services (Medical Outpatient Building) |
| Bain Capital Life Sciences (backed by Bain Capital) | Serán Bioscience | $200 million | Biotechnology |
| Commure (backed by General Catalyst) | Augmedix | $139 million | Other Services (Medical Documentation Services) |
| Elliott Bay Capital Trust | Medical outpatient building in Vernon Hills, Illinois | $18.7 million | Other Services (Medical Outpatient Building) |
Active Acquirers
The most active acquirer in Q3 2024 was Heartland Dental, backed by PE firm KKR & Co. Inc., with seven deal announcements. Other notable active PE-backed acquirers included:
- Dental365, backed by The Jordan Company, with four deal announcements.
- MB2 Dental Solutions, backed by Charlesbank Capital Partners, with three deal announcements.
- OneOncology Inc., backed by TPG Capital and AmerisourceBergen, with three deal announcements.
- Specialized Dental Partners, a portfolio company of dental-focused PE firm Quad-C Management, with three deal announcements.
Broader Trends in Private Equity M&A in Healthcare
PE’s role in healthcare continues to evolve, driven by industry trends and economic factors. While the sector has faced challenges, there remains significant interest and investment in healthcare-related businesses.
One notable trend is the increasing focus on value-based care. PE firms are seeking to invest in healthcare providers that can demonstrate improved patient outcomes and lower costs. This shift aligns with broader industry efforts to move away from fee-for-service reimbursement and towards models that incentivize quality and efficiency. For example, the R1 RCM deal reflects a focus on RCM, which is a critical component of value-based care by ensuring accurate and timely billing, reducing denials and improving cash flow for healthcare providers.
In addition, there has been a surge in investment in healthcare technology. PE firms are attracted to innovative companies developing digital health solutions, telemedicine platforms and artificial intelligence (AI)-powered tools. These technologies have the potential to transform care delivery, enhance patient experiences and improve healthcare outcomes, and PE firms are clamoring to get behind them. Commure’s acquisition of Augmedix is an example of PE looking towards AI to revolutionize medical documentation and improve physician efficiency. Augmedix’s AI-powered technology automates medical documentation, freeing up physicians to spend more time with patients and reducing administrative burdens.
Moreover, the growing consolidation of healthcare providers is another significant trend. PE firms are actively involved in M&A, combining physician practices and other healthcare entities. This consolidation can lead to economies of scale, increased bargaining power with payers especially and improved access to capital.
While consolidation can offer certain benefits, such as economies of scale and improved access to capital, it also raises concerns about market concentration and potential negative impacts on competition. As the number of independent healthcare providers decreases, there is a risk that providers may have reduced incentives to offer competitive prices or improve quality of care. This is particularly concerning in markets with limited choices for patients, as it may limit options for affordable and high-quality care. Additionally, concentrated markets can hinder innovation and limit the development of new treatments and technologies.
For example, a report by Marketdata highlights that consolidation and mergers in the physical therapy industry have been on the rise, which can contribute to higher prices due to reduced competition. The Kaiser Family Foundation has also highlighted that consolidation in healthcare markets, including rehabilitation clinics, often results in reduced competition.
These broader trends are influenced by demographic factors, such as aging populations and increasing demand for healthcare services, as well as technological advancements and an increasingly complex regulatory environment. Despite challenges, the healthcare sector remains an attractive investment opportunity for PE firms, driven by the potential for both financial returns and positive societal impact. However, navigating the complex regulatory environment and balancing financial goals with patient-centered care remains a challenge for investors.
