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'Shrinking margin for error' in healthcare M&A: Bain

Healthcare mergers and acquisitions face a number of rising threats: high interest rates, regulatory probes and "macroeconomic uncertainty," to name a few. That means deals will need to be more thoughtful in 2024, according to a Jan. 30 article on Bain & Co.'s website.

Eighty percent of healthcare executives surveyed by the consulting firm plan to complete the same amount of deals or more in 2024; 60% of surveyed practitioners in healthcare and life sciences said they aim to divest underperforming assets. 

But the pressure is on to acquire with intention as healthcare and governmental relations become increasingly complex. Efforts to decrease government spending require forethought for potential revenue; regulators are scrutinizing with a closer eye, delaying deal closures. 

"The margin of error has shrunk for getting the anticipated return for any M&A in healthcare and life sciences," according to Bain's article. 

Although healthcare was one of few industries to see deal value rise in 2023, the uptick was concentrated in the pharmaceutical industry, the article said. Deals in the payer, provider and healthcare services spaces remained "relatively low," and the firm expects this trend to continue in 2024. 

Here are predicted trends to watch, according to Bain: 

  • Large payers will continue to leverage mergers and acquisitions for scale or to lower care costs. 

  • Regional healthcare organizations will continue formulating deals that allow them to scale primary care, facility care and home health lines. 

  • Pharmaceutical companies will continue to look for "innovative assets" in traditional areas (such as oncology and rare disease) and newer ones (such as weight loss and precision medicine).

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