Thoughts and Takeaways from the J.P. Morgan Healthcare Conference | Waller Lansden Dortch & Davis, LLP

Last week healthcare dealmakers from around the world gathered in San Francisco for the 41st annual J.P. Morgan Healthcare Conference. After a three-year hiatus, the energy was high and the excitement was palpable. Waller had 15 members of its team in attendance alongside several members of the Holland & Knight team, the firm with which Waller will soon combine. We gathered our collective thoughts and takeaways on the key themes identified through our more than 50 meetings with investment bankers, lenders, private equity firms, healthcare companies and other advisors. Many of the predictions made by Waller’s David Marks and Morgan Ivey leading up to the conference certainly held true along with some additional themes, which we’ve summarized here.

Deal volumes: In 2022, as a function of smaller value roll-up and platform add-on transactions,  healthcare services deal volumes continued to increase while deal values declined from the peak set in 2021.

Deal certainty: There is a lot of chatter about how sellers can get comfortable pre-LOI that a buyer will have the wherewithal to close, without bogging down the sale process.

Deal speed: Given a variety of factors, there was a big push over the last couple years to get deals done quickly which required speeding up the diligence process.

Valuation gaps: Valuations across healthcare sectors were at an all-time high during most of the last three years. For a variety of reasons, we’ve seen in recent months a widening gap between buyer and seller valuation expectations. Sellers are no longer getting the multiples they did in the recent past and will likely need to reset expectations.

Valuations based on unproven financials: The COVID era (2020-mid-2022) saw a willingness to underwrite deals with high-end valuations based on less than 12 months of high-end performance, but with a chunk of purchase price paid with contingent earnouts. In 2022, we saw the reemergence of the earnout as a way to bridge valuation gaps between seller expectations and buyers.

Credit markets: The shifts in central bank policy to combat inflation resulted in a tight credit market. This impacted M&A as the higher rates limited large-check financing and forced funds to be creative to get deals done and provide returns to limited partners (LPs).

Regulatory headwinds: In 2022, healthcare consolidators were acutely aware of the Federal Trade Commission and other regulators’ attention on private equity investment in healthcare. President Biden stated that healthcare was one of four areas he and the FTC would be watching closely. And, on January 5, right before we headed to the J.P. Morgan Healthcare Conference, the FTC announced a proposed rule to eliminate non-compete agreements that would have a dramatic effect on the industry. While many of our conversations in San Francisco noted concern for the proposal, most suspect that it won’t be as extreme as the proposed rule’s initial language.


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