Last week, Ben Swett, Managing Editor of The SeniorCare Investor, was joined by John Tiedmann, Managing Director at Physician Growth Partners, Bill Hoffman, Shareholder at Polsinelli and Matt Bogle, Managing Director at Intrinsic, to discuss the trends facing the healthcare industry. Based on data in the LevinPro HC database, the conversation covered a wide range of topics, from the post-2022 decline in deal volume to the specific specialties currently attracting the most investor interest.
Although 2025’s deal total in the healthcare services sectors (1,793) marks a steady climb from 2024 (1,676), it still trails the heightened activity seen in 2022 (2,028) and 2021 (1,880). The panel attributed the slowdown chiefly to three factors: rising interest rates, the disconnect between buyer and seller expectations and a broader sense of investor apprehension.
“The most obvious issue has been just the rise in interest rates, making deals kind of harder to finance,” said Bogle. “And also, probably a little bit of snapback from the kind of post-COVID bust where valuations got really out of whack.”
The speakers noted that the dip in deal volume is mostly a matter of perspective; it only appears low when compared to the peaks of 2021 and 2022. While they stopped short of predicting a return to those historic highs, they emphasized that current activity remains fundamentally strong.
Bogle also reinforced the positive outlook by highlighting the bid/ask spread is closing, which is expected to trigger a rise in deal flow.
“Sellers had in their minds those peak valuations and buyers were getting very conservative; the bid-ask spread got very wide,” added Tiedmann. “Every physician who wanted to sell their practice was thinking some double-digit multiple was the norm.”
Sellers are beginning to face the reality that peak valuations of previous years are no longer attainable. As expectations align with current market conditions, deal flow is anticipated to remain robust.
Another factor contributing to the slowdown in deal volume is the selectivity of buyers. While investors are still eager to make deals, they’re more methodical and careful with their investments. Assets are taking longer to come to market and the deal process has lengthened to accommodate increased scrutiny.
“Buyers generally are being much more disciplined on what they’re giving credit for. It’s got to be something that is rock solid and proven out of historical data,” commented Bogle. “And a lot of the forward-looking assumptions are just not being looked at the same way as they were maybe four or five years ago.”
While Hoffman did not disagree with his fellow speakers, he placed his emphasis on a different issue: the cost of labor in healthcare.
“There are remaining macro environment issues that are still making buyers nervous and making LPs trepidatious about investing in funds that are healthcare specific,” he said.
Hoffman drew attention to the labor shortages in nursing and specialized clinicians that have caused wage inflation and resulted in EBITDA suppression. This has fueled caution and made investors “look more to the tech-enabled side of health care instead of hospitals, physician practice management and other labor-intensive aspects of the health care sphere.”
But the overall outlook was far from pessimistic, as the speakers remained relatively bullish for the year ahead. The optimism stems from a closing bid/ask spread, more realistic valuation expectations and the anticipation that private equity (PE) firms will soon begin bringing their sidelined portfolio companies to market.
“We came into this year with really high expectations that the logjam was going to break, meaning the platforms that have been owned by PE will be traded to free cap space. That will rejuvenate M&A strategy,” said Tiedmann.
He also noted that he has already begun to see this happening in certain areas, such as retina, gastroenterology and neurology.
“As those trade, you’ll start to see second bites become reality. There’ll be value in rollover equity for some physicians who did deals,” Tiedmann said.
“There’s always a cycle of concern, and at the end of the day the money always wins,” noted Hoffman, alluding to the idea that deal activity will never dwindle entirely because there’s simply too much money to be made.
Another topic that permeated throughout the discussion was the impact of regulations on M&A activity. Regulatory restrictions have long been a topic of conversation, with industry experts fearing tighter regulations that restrict M&A activity and investor growth. However, Hoffman noted that regulatory restrictions, especially in states such as California and Rhode Island, have panned out to almost nothing. The calm sentiment was echoed by both Bogle and Tiedmann.
“We have not seen many states that have actually blocked a transaction in the healthcare space,” said Hoffman. “We’ve seen some that have been modified, but we haven’t seen many, if at all, that have been stopped.”
Regarding the corporate practice of medicine, Hoffman noted that several states (such as Rhode Island, Washington, Oregon, California, and Minnesota) were considering bills to ban PE MSO models, which had been in effect for more than thirty years.
“Fortunately, or unfortunately, depending on your politics, the PE lobby is incredibly strong and the only state where that law has actually passed is Oregon,” he said.
“Some of the concerns in those states have landed in a place that is more favorable for private equity. Some of the clarity [surrounding regulations and policy changes], helps on a state-by-state basis, grease the wheels for more transaction activity,” added Tiedmann.
Furthermore, the speakers said that many PE groups don’t care about regulatory concerns and are willing to take the risk anyway. Due to this nonchalant attitude, regulations (and the prospect of tighter regulations) haven’t affected deal activity or buyers’ interest in those deals.
Stay tuned for the next webinar wrap-up, which will provide a look at key trends fueling or hindering deal activity across sectors.
