PwC: Cautious Optimism, Apprehension To Follow Nursing Home Dealmaking into 2024

Dealmaking in 2024 comes with cautious optimism and some apprehension from industry leaders in health care, including those in the nursing home space, as deal volume continues to be buffeted by macroeconomic headwinds. 

In line with the skilled nursing space, overall health services deal volumes through Nov. 15 have declined 13% compared to 2022 levels, according to a report published by audit, tax and advisory firm PwC, which cited data published by Irving Levin Associates.

But, record levels of capital on hand combined with current investments reaching the end of their target hold period – along with more non-traditional deal structures – may provide momentum for additional activity next year, PwC researchers said.


For nursing homes, this may look more like divestitures, with companies particularly in the acute care space looking to reposition themselves away from SNFs as labor shortages and reimbursement gaps persist.

The post-acute care space is a “less desirable commodity” as investors see slow occupancy recovery, increased operating costs and challenging labor markets, John Capasso, executive director for senior care with Health Dimensions Group (HDG) told SNN in a previous article.

Interest rates have been at a sustained higher rate, and an increase in federal and state regulatory concerns are contributing factors of less dealmaking across all care settings, the PwC report found. Valuation gaps and general macroeconomic risks also played a role.


Regulatory scrutiny extends to specific transactions as well, PwC noted in its report, while subsector providers including nursing homes continued to express concerns over reimbursement rates.

Increases approved by the Centers for Medicare & Medicaid Services (CMS) were deemed inadequate by providers, as labor and supply costs exceeded inflation expectations, researchers said.

“This, along with the increased cost of capital, may drive liquidity challenges, particularly for providers hit by reduced Medicaid enrollment following redetermination,” analysts said in the PwC report. “Struggling businesses hit by these factors are prime acquisition targets for opportunistic investors.”

Comparing 2022 and 2021 was a different story, with record years of deal volumes. And, trailing 12-month deal volumes as of November remain twice the average of annual levels seen between 2018 and 2020, PwC reported.

The firm noted that figures only reflect disclosed deals and not private market deals, but these still illustrate the impact headwinds are having on “larger transformational deals.”

In terms of corporate and private equity, both players still have large levels of capital that need to be deployed, according to PwC.

“Corporate entities recognize the importance of business reinvention and portfolio transformation to achieve growth and profit expectations, with M&A seen as a leading way to drive these changes,” researchers said. “PE has been inwardly focusing on value creation at its portfolio companies.”

Since federal rate cuts aren’t expected until mid-2024 at the least, there may be pressure on traditional financing structures especially when it comes to larger deals, according to the report.

That may lead to more unconventional deals in the new year, as “incumbents” face threats from non-traditional players and acuity shifts.

“Retail sites are becoming even more valuable for providing direct care and indirect services such as decentralized clinical trial support,” researchers noted.

The report briefly touched on Generative artificial intelligence (AI) as it relates to dealmaking as well, with ventures as a source of deal activity depending on evolving regulations that are shaping patient rights.

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