Healthcare Therapy Transactions and Valuations

Between Q1 2020 and Q2 2024, over $32 billion was deployed across 1,127 M&A transactions in the healthcare therapy sector by global firms, with an average deal size of $28 million.

The healthcare therapy industry, a key segment of the broader healthcare sector, includes physical, occupational, and speech therapy services delivered in settings such as homes, clinics, and private facilities. Future growth is driven by an aging population, increasing demand for therapy to address age-related conditions, and the rising prevalence of chronic diseases requiring ongoing therapeutic care.

Technological advancements, such as wearable devices, and policy changes promoting value-based care will enhance service effectiveness and accessibility. Public awareness and workforce expansion will also support industry growth.

• The valuation multiples are based on a sample set of private M&A transactions and publicly listed healthcare therapy companies in the sector. The data was collected on August 7, 2024.
• The sample set typically trades at an enterprise value to revenue multiple range between 1x and 5x, staying consistent in this range as the enterprise value of the business increases.
• Enterprise value to EBITDA multiples varied significantly, typically ranging between 10x and 20x. This valuation increased significantly for businesses valued at $100 million or more in enterprise value.

• Between Q1 2020 and Q2 2024, over $32 billion was deployed across 1,127 M&A transactions in the healthcare therapy sector by global firms, with an average deal size of $28 million.
• Q1 2023 reflects the period with the most significant deployment of capital, $6 billion, while Q4 2021 experienced the highest deal count, 96.
• The average deal count has fluctuated significantly but has consistently remained at over 20 deals per quarter. The average deal count per quarter was 63 deals.
• This high average deal count indicates that there is a consistent global demand for M&A transactions in this industry.
• The largest completed transaction was the 60% acquisition of CenterWell Home Health by Humana for an estimated $3.6 billion on August 17, 2021.

• The United States dominated the space in terms of capital investment and deal count, receiving $20 billion in capital investment with a deal count accounting for 81% (902 deals) of the total M&A transactions. This dominance is due to the large size and maturity of the US healthcare market, which offers greater opportunities for consolidation and investment.
• The United Kingdom and Germany follow the US in terms of capital investment, receiving 9% ($2.2 billion) and 5% ($1.2 billion) of the total capital, respectively. In deal count, Germany has 35 deals, while the UK has 22 deals. These countries have robust healthcare systems and strong investor interest, particularly in innovative healthcare solutions and technologies.
• Australia and Canada have seen moderate activity, with Australia receiving $850 million and Canada $456 million in capital investment, accounting for 20 and 27 deals, respectively. Other countries collectively account for 10% of the total deal count and $757.28 million in capital investment.

• M&A transactions represent the largest share of capital invested ($19.5 billion) and have a significant deal count (489 deals). This indicates a strong preference for traditional mergers and acquisitions as a strategic growth and consolidation tool in the healthcare therapy sector. 
• Buyout/leveraged buyout (LBO) deals are the most numerous, with 623 deals, and substantial capital investment ($4.3 billion). This reflects the popularity of buyouts as a method for private equity firms to acquire and restructure companies for potential growth.
• Add-on transactions are also prevalent, with 509 deals and $1.9 billion invested. This suggests that companies are actively seeking to expand their existing operations by acquiring smaller firms to enhance their service offerings or geographic reach.
• The average deal size was the largest for public to private transactions at $211 million per transaction. This is due to the nature of publicly listed companies being mature with a high enterprise value. Reverse mergers and M&A had the second and third highest average transaction size at $90 million and $40 million, respectively. 

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The healthcare therapy sector has seen substantial investment and consolidation, with over $32 billion deployed across 1127 M&A transactions from Q1 2020 to Q2 2024. The industry’s growth is driven by an aging population, rising chronic diseases, and technological advancements. The US leads in deal count and investment, followed by the UK and Germany. Valuation multiples for M&A transactions highlight an attractive market with consistent demand driven by high valuation multiples indicating the anticipated growth potential and demand for consolidation in the industry. This dynamic environment underscores the sector’s critical role in enhancing patient care and its potential for continued expansion and innovation.

Sources: Kroll Healthcare Sector M&A Industry Insights Fall 2023 Executive Summary, 2023 Healthcare M&A Report – VMG Health, Behavioral Healthcare Services M&A Update – Capstone Partners, Opportunities Abound Even as Risks Rise: Q3’22 M&A Trends In Healthcare – KPMG, 2022 Global Healthcare Sector Outlook – Deloitte, Healthcare Transactions Update – JTaylor, Healthcare M&A And Investment Trends: Opportunities & Challenges – Stax, Healthcare M&A Weekly – Tripletree, 2023 Healthcare M&A Report – Healthcare Appraisers