You Asked, We Answered: 10 of Your Top M&A Questions

Volume 11, Issue 16, August 27, 2024

By: Anna Elliott, CM&AA

Considering the substantial global and national turmoil of the past several years, it should come as no surprise that the current mergers and acquisitions (M&A) landscape is complex, and navigating it is challenging. These are a few of the main reasons why healthcare business owners and buyers frequently reach out to the VERTESS team: They are looking for expert help with executing successful transactions that meet personal and professional goals in this dynamic landscape. 

A significant role we play as healthcare M&A advisors is to answer questions from our clients and prospective clients about the issues affecting sellers, buyers, and transactions more broadly. Below are 10 of the questions we are being asked and answers intended to capture the current sentiments and strategic considerations in the M&A market.

Q1: M&A deals declined in the first half of 2024. What was the cause?

A: Several factors contributed to a fairly significant downturn in deal activity. Among them: high interest rates, lower current valuations than the same period last year, and political uncertainty.

Q2: Is M&A activity likely to increase in the near future?

A: Yes, there is a strong belief that M&A activity will rebound, and it will be driven by pent-up demand from both buyers and sellers as uncertainties that have been weighing on the market begin to resolve.

Q3: How are private equity firms responding to the current M&A landscape?

A: Many private equity firms are feeling increased pressure to sell, particularly those with portfolios comprised of numerous aging companies. Such a scenario is prompting an elevated focus on realizing returns to maintain investor confidence.

Q4: Are there signs of increased activity among sellers?

A: We have seen a noteworthy rise in sale preparations, which include the development of full-potential business plans and vendor due diligence engagements.

Q5: I heard that the need for M&A is greater now than in previous periods. Why is this the case?

A: We canpoint to the cumulative pressures of low-growth economic conditions combined with the need for businesses to adapt and innovate as reasons that are driving an elevated interest in strategic transactions.

Q6: Artificial intelligence (AI) continues to be a big topic of discussion within and outside of healthcare. How could AI influence M&A transactions?

 A: Generative AI, which is the use of algorithms (e.g., ChatGPT) to create content, has the potential to disrupt various sectors, including healthcare. Disruption creates challenges and opportunities for companies. This then influences M&A strategies — potentially significantly, depending upon the extent and short- and long-term impact of the disruption.

Q7: When is the optimal time to sell my business?

A: The optimal time to sell is when you, as the owner, feel personally ready to move on to your next chapter, whether that's retirement, starting a new venture, or spending more time with family.

Q8: How should I take market conditions into consideration when deciding whether to sell my company?

A: While market conditions usually influence the valuation and sales price of a company, they should not be the primary factor in your decision to sell. The timing should be based on your readiness rather than trying to time the market. My colleague, Bradley Smith, tackled the topic of timing the market for an exit in this column.

Q9: How do rising interest rates impact the sale of my business?

A: Rising interest rates can affect the overall financing landscape, making it more expensive for buyers to obtain the loans they typically need to make acquisitions. However, it's important to understand that buyers adapt to these changes. While the cost of debt has increased, many buyers are shifting toward equity financing and still actively seeking acquisitions. Interest rates may influence buyer behavior, but they won't necessarily deter potential buyers from pursuing your business.

Q10: Is feeling burned out with my business a good reason to consider selling?

A: It's a very good reason to consider selling. When enthusiasm for owning and operating a company declines, it will likely negatively affect your business and its performance. This may not only hurt your company's valuation and thus its sales price, but it may also turn away buyers who see a company moving in the wrong direction.

Ready to Answer Your Healthcare M&A Questions

These questions and their responses help paint a picture of the current M&A market and key considerations for sellers and buyers. They also emphasize the importance of remaining adaptable and well-informed as you pursue a sale of your healthcare company or acquisitions of businesses. If you are looking for expert assist with transactions, including getting questions like those above answered, reach out. The VERTESS team of Managing Directors, who are focused on specific healthcare verticals, would welcome the opportunity to speak with you about your situation and what we can do to help ensure you achieve the best transaction outcome possible.

Anna Elliott CM&AA

With over 15 years of experience in healthcare technology, post-acute care, hospice, and urgent care, I am a highly experienced healthcare executive. I have successfully supported numerous private equity roll-ups and exits in the home healthcare sector. My extensive knowledge of the healthcare industry and my leadership in the M&A community, as a certified M&A Advisor (CM&AA) and member of the Executive Committee of the Chapter of the Association for Mergers & Acquisitions Advisors (AM&AA), distinguish me from others in the field.

Throughout my career, I have specialized in healthcare and have excelled in attracting healthcare technology firms and industries that are growing through Mergers + Acquisitions. I have a strong ability to target specific needs and opportunities in the business supply and demand process, resulting in over $150 million in value delivered to organizations.

As a co-founder of M&A Finders, a boutique Merger and Acquisition advisory firm in Pittsburgh, I have been able to pursue my passion for advocating on behalf of buyers and sellers in achieving their M&A goals. I am excited to bring my skills and network to VERTESS, where I have access to the necessary resources to further expand my impact in the healthcare industry.

We can help you with more information on this and related topics. Contact us today!

Email Anna Elliott or Call: (724)900.1377