On July 1, 2022, Venable attorney Ari Markenson was quoted in Healthcare Innovation on notable changes facing healthcare organizations active in the mergers and acquisitions market. According to the article, the aftermath of COVID-19 and the changing climate in financial markets are throwing up roadblocks that are hampering deal activity, even though longer-term fundamental tailwinds such as the shift to outpatient settings and technology enablement remain in place.
Buyers and sellers in the middle market today face various red flags they didn’t have to consider six months or a year ago. Some buyers have become more wary of committing to purchases because COVID and its fallout have clouded the financial pictures of the businesses they’re eyeing. A typical dental practice, Markenson said, would have seen next to no patients the first six months of the pandemic, but then put up a gangbusters 2021. Halfway through 2022, he said, many a buyer and seller still can’t judge the true profitability and viability of such ventures.
Markenson said some potential purchasers are walking away from auctions relatively early because of the time and money they expect to spend only to be handily outbid by more muscular peers still willing to see past potential issues and put to work some of their capital.
"COVID threw a lot of insanity into the market” from a pricing standpoint, Markenson said. "But there already was a lot of insanity in the middle market pre-pandemic. I think a lot of folks went downmarket because valuations for larger deals had become unsustainable.”
Click here to access the article.