There have been a lot of different factors recently that have led us to live in such uncertain times. First it was the pandemic leaving us to figure out how to stay safe. Then there was burnout leading to a major shortage in the workforce. Entering another recession is just another item in a long list of events that we are now trying to scramble and figure out how to endure. So how are companies meant to continue on and how does it affect the future of M&A?
With the recent recession, an air pocket has been created in macroeconomics around M&A. It has become a lot harder for large buyouts to be able to raise the kind of debt these organizations need to finance this decision. But it hasn’t been impossible.
“A lot of strategics that are well capitalized, so large public companies that are flush with cash, that have seen the valuation trends in healthcare IT over the last few years mostly sat that out, with a few notable exceptions. They’re now saying this is sort of like Black Friday or Cyber Monday, we’re buying companies and now’s the time. And so you have a lot of strategics thinking really hard about what their priorities are and how they can execute on M&A now that sets them up for a post-cycle boom in the next few years taking advantage of the attractive valuations that we have today.
“Now that hasn’t happened overnight and I think part of the reason we haven’t seen a true deal explosion of activity yet from strategics is because there’s still some elements of a bid/ask spread between buyers and sellers. Buyers are saying ‘Well, you’re 40% off so you have time to sell.’ Sellers are saying ‘We were worth 50, 60, 70% more just a few months ago and that’s what we’re still worth, that’s fundamental value.’ That spread is narrowing and it will continue to narrow over time and we’re approaching the strike zone where I think you’ll see a lot more deal activity because both sides see that there’s value to be created from meeting in the middle and I expect a lot of that especially going into ‘23.” said Rahul Rekhi, Co-Lead of Healthcare IT at Lazard and Head of Lazard’s Special Opportunities Group.
To learn more about the future of healthcare M&A, watch the full interview with Rahul Rekhi down below!
Learn more about Lazard: https://www.lazard.com/
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