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Healthcare services continues to attract attention from buyers across a broad range of backgrounds. While 2021 and 2022 proved to be record years for healthcare M&A, 2023 could be just as vigorous. Although broader economic slowdown will impact deal flow and valuations, the demand for quality assets is anticipated to remain strong in the healthcare vertical.

As the pandemic recedes, pharmacy continues to generate interest from an array of acquirers. In many instances, the interest is redirected from a slowing demand for tech and other industries that experienced a surge during the pandemic and are now losing steam. Contrary to those fast-paced categories, pharmacy is a more consistent and reliable sector, characterized by strong growth and expanding patient population. Further, public acquirers and private equity (PE) groups see an abundance of opportunity through vertical and horizontal integration. Roll-up acquisitions by PE groups continue to grow in popularity as they seek to reduce costs, streamline operations and gain access to new markets. While strategic acquirers continue to diversify and integrate their supply chain and customer bases. Yet, sellers are keenly aware of the advantages a buyer must bring to a transaction, offering more than an attractive enterprise value.

Independent pharmacy activity and valuations ramped up during the two years preceding 2023. Moreover, the sector shows no sign of slowing as institutional pharmacy returns to pre-pandemic levels and telehealth, online pharmacy, and new technologies expand organizations' reach to diverse patient populations. This means there is tremendous opportunity for acquirers to grow platforms and bolt on companies that offer overnight synergies. Some of the pharmacy segments that continue to dominate M&A markets via surging valuations and demand include compounding pharmacy (503A and 503B), digital pharmacy, 340B, long-term care, orphan drug, hub services and infusion (specialty and home infusion).

The coming year is anticipated to be very energetic for pharmacy M&A. Interest rates are expected to continue to rise to levels not seen in years and in the face of uncertainty, healthcare and pharmacy are insulated sectors with a level of predictability. An aging America provides consistent growth for the industry while Medicare provides a reliable payment system. The challenge then, is for pharmacy businesses to be first to market with cutting-edge technology and services that will in turn maintain their competitive edge. Thereby continuing to drive value and care, for their number one customer, the patient.

Harbor Healthcare - 100 years of combined knowledge

Harbor Healthcare is a boutique merger and acquisition firm. We offer a variety of M&A services to healthcare services businesses and have been representing owners and investors across the U.S. and Canada since 1995. Serving the needs of entrepreneurs and investors with exceptional value creation and perceptive advisory solutions. Our strategic healthcare experience and expertise is with you from the pre-planning stages to your successful close and beyond. We are with you every step of the way.

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