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Healthcare M&A update: H2 2024
Apr 02, 2025
H2 2024 healthcare providers and services public market update
Healthcare (HC) public market overview
After experiencing years of margin pressure following the global COVID-19 pandemic, healthcare providers and services companies saw financial and operating metrics stabilize in 2024. Despite this, healthcare providers and services companies’ stocks underperformed the broader market as investors flocked to sectors with more exposure to artificial intelligence (AI). With recent stabilization providing a platform for growth, along with discounted valuations for healthcare stocks compared to the broader market, 2025 could be an attractive entry point for prospective investors in the space.
Since the COVID-19 pandemic, healthcare providers and services companies have battled lower patient volumes and increased personnel expenses. Throughout 2024, volumes rebounded to pre-COVID levels as patients who deferred surgeries and treatments during the pandemic elected to have procedures performed. Concurrently, providers reined in labor expenses by reducing their dependency on expensive contract labor. While labor shortages still pose a problem, providers seem to have designed and implemented successful recruitment and retention strategies for full-time employees while leveraging technological capabilities to make their workforces more efficient.
While labor expenses cooled in 2024, providers and services companies had to contend with rising expenses elsewhere. Administrative costs associated with payer requirements are one area of increase. Additionally, companies spent more on things like medical supplies, drugs, and purchased services such as laundry and linen, security, and maintenance.
Overall, volume growth as more surgeries and treatments were performed, coupled with significant labor cost savings have resulted in a stronger financial and operating picture for healthcare providers and services companies in 2024. Increasing operating margins, patient volumes, outpatient revenue, and average patient length of stay have led to stronger balance sheets and increasing operating cash flows. This rebound in performance could be an inflection point for the sector and provide a springboard for growth in 2025 and beyond as companies execute on their strategic growth plans.
In H2 2024 and 2024 overall, the BT Capital HC Index underperformed the S&P 500 as the performance of managed healthcare and non-acute care stocks weighed on the index’s performance. The BT Capital HC Index outperformed the iShares US Healthcare Providers Index (IHF), driven by exceptionally strong gains from Encompass Health Care Corporation (EHC) and Tenet Healthcare Corporation within the acute care subsector; AdaptHealth Corp. (AHCO), Addus HomeCare Corporation (ADUS), Aveanna Healthcare Holdings Inc. (AVAH), InnovAge Holding Corp. (INNV) within the home health and hospice subsector; Pediatrix Medical Group, Inc. (MD) within the non-acute care subsector; and The Pennant Group, Inc. (PNTG), Sonida Senior Living, Inc. (SNDA), and Welltower, Inc. (WELL) within the long-term care subsector.
H2 2024 healthcare providers and services spotlight
2024 BT Capital HC index performance and select multiples
Valuations continued to stabilize in H2 2024, but remained below 2021 peaks, with long-term care showing the strongest multiples of all subsectors.
BT Capital HC Index
Median TTM revenue growth rates ( % )
Historical healthcare providers and services trading multiples
H2 2024 healthcare providers and services M&A insights
HC providers and services M&A insights (U.S.)
The healthcare providers and services companies M&A market faced significant uncertainty in 2024 as the presidential election, labor market conditions, elevated interest rates, and regulatory scrutiny all curtailed deal activity. Despite lower deal volume in H2 2024 compared to both H1 2024 and H2 2023, a handful of larger deals, specifically in the healthcare provider IT, hospitals, and rehabilitation and long-term care subsectors drove deal value higher when compared to H1 2024 and H2 2023.
One result of the regulatory uncertainty in 2024 was a shift away from physician practice management deals toward healthcare provider IT. Deals in this space are less exposed to regulatory changes and are also consistent with providers’ and services companies’ intentions to optimize workflows and drive efficiency. This trend was highlighted by Clayton, Dubilier & Rice, LLC and TowerBrook Capital Partners L.P.’s acquisition of R1 RCM Inc. for $8.6 billion in November.
Orlando Health’s acquisition of Brookwood Baptist Health, Inc. for $1.3 billion in October provided evidence of the continued trend of larger, well-capitalized health systems tucking-in smaller hospitals and health systems. Tuck-ins like this add scale, geographical diversity, or ancillary services in current markets.
Overall, healthcare M&A continues to stabilize following the COVID-19 pandemic as headwinds and uncertainty ease. As the disparity in financial health between larger operators and smaller operators continues to widen, expect strategic deal activity to remain robust. Coupled with this, providers and service companies remain dedicated to investing in technology.
Per Capital IQ data, the volume of U.S. healthcare providers and healthcare services companies deals remained mostly flat in H2 2024, with 276 deals closing compared to 289 closed deals in H1 2024 and 296 closed deals in H2 2023. However, H2 2024 M&A deal value nearly doubled compared to H1 2024 and increased more than five times compared to H2 2023. This was driven by three large deals closing during the period, each with an enterprise value greater than $1 billion.
HC providers and services M&A activity – deal breakdown (segment)
Healthcare services companies were the most sought after by buyers in H2 2024, accounting for 60% of closed deals in the period while healthcare facilities accounted for 38% and managed healthcare deals rounded out the total with 2% of deal volume.
HC providers and services M&A activity – deal breakdown (geography)
Florida was the state with the most closed deals in H2 2024, with 28 deals closed. California, Texas, North Carolina and Pennsylvania made up the rest of the top five.
H1 2024 Select HC providers and services M&A spotlight
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Mergers and acquisitions reports
See reports for different industries and regions
Baker Tilly Capital professionals develop mergers and acquisitions (M&A) updates in different industries and regions. These reports provide an overview of M&A activity, including:
- M&A activity by market segment
- Transaction data for middle market M&A activity
- Buyers and targets by location
- Notable transactions closed during the period of the report
To view more on this topic or learn how Baker Tilly specialists can help, contact our team.