Takeaways from the 2023 JPM Conference

Perspectives gathered by seven BCA bankers from middle market investors, lenders, executives and professionals orbiting the J.P. Morgan Healthcare Conference

General Market Observations

• Debt markets tightened significantly during 2022 as lenders focus inward on credit quality
  • Fewer lenders supporting platform recap transactions leverage multiples are lower
  • Existing credit facilities are more expensive available funding for add ons has come down
• Middle market deal volume has slowed in 4Q22 and early 2023
  • Activity for high quality assets in the lower middle market will remain strong however, levered recap transactions valued at $250M+ will be less frequent in 1H23
• While it’s not a buyers market, valuations are down from 2021 highs and have returned to normalized pre-pandemic levels
• Transactions driven by strategic synergies are the most appealing in the current environment
• Excellent time for portfolio add-ons and tuck-in deals

Healthcare Services Observations

• Investors are expressing cautious interest in most provider models developing value based revenue streams
• Behavioral health across most services settings continues to attract interest
• Retail health strategies, such as urgent care and dental, are finding favor
• Healthcare provider models mentioned frequently during the conference
  • Primary care services ranging from global MA risk to home based
  • Among physician specialties, cardiology is grabbing the most attention
  • Outsourced services into the pharma channel
  • Innovative home care models such as hospital at home or aging at home enablement
  • Other sub-sectors: med spa, Medicaid risk models, home DME and ambulatory infusion
• Staffing shortages expenses are impacting provider model performance across the continuum

Healthcare Technology Observations

• HCT assets are facing greater scrutiny in terms of the “have to have” vs “nice to have” dichotomy demonstrable ROI is critical
• Repricing on multiples across most sectors of HCT
• Continuing significant interest in revenue cycle management assets – specifically complex claims
• Profitability matters – the bias has shifted away from growth at all costs to profitable growth