Kathleen M. Premo, Member of the Firm in the Health Care & Life Sciences practice, in the firm’s St. Petersburg office, authored an article in Middle Market Growth, titled “What’s Ahead for Strategic Healthcare Acquirers in 2024.”

Following is an excerpt:

As we step into the dynamic landscape of 2024, the healthcare industry stands at the intersection of unprecedented opportunities and complex challenges within the realm of mergers and acquisitions. As a healthcare regulatory and M&A attorney, I think a lot of the momentum this year can be related to regulatory changes and the lingering business impact of the COVID-19 pandemic, fueling the need for deals as businesses refocus and divest non-core businesses.

And while many healthcare consultants and attorneys expect 2024 to be just as busy of a year in healthcare M&A, this year’s deal drivers will inevitably shift. PE sponsors will likely take some time to focus on refining and growing existing platforms. And as deals shift toward the middle market as mega deals prove more challenging, strategic acquirers will find new M&A opportunity in the year ahead, despite ongoing headwinds.

Let’s take a look at what’s going to be hot and maybe not due to regulatory challenges.

2024 Opportunity #1: Smaller Acquisitions

The landscape of M&A is ever evolving and 2024 is no exception. This constant change brings its own set of unique challenges and opportunities.

While smaller acquisitions can prove as challenging as large deals due to the lack of formal policies and processes, they also present a true opportunity to bolster the performance of lagging platforms and expand market presence.

One particular area that’s very hot for corporate acquirers are transactions involving small hospitals and health systems. While there’s been a surge in high-profile health system M&A, smaller systems are seeing a lot of activity. Whether it’s regulatory difficulty merging large systems, or small systems looking for support and camaraderie dealing with the operational challenges like COVID, staffing, regulatory or reimbursement changes, small systems are merging.

Additionally, smaller transactions encounter fewer barriers concerning regulatory approvals, a significant advantage given the changing laws attempting to restrict unchecked private equity investments. Several states have begun to enforce or try to enact laws that mandate regulatory approvals for transactions exceeding specific thresholds making smaller deals easier to execute on. …

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