BDO Capital’s Q1 2015 Healthcare RCM M&A Review & Outlook

The revenue cycle management (RCM) sector continues to experience high growth, with strategic buyers seeking to expand and financial buyers looking for an entry point. In the latest BDO Capital Healthcare Newsletter, our leading professionals provide insight into what’s fueling the charge.
  • A growing need for healthcare RCM providers. Faced with increasing costs, ever-changing rules and regulations and a complex payment process, healthcare providers are increasingly turning to outsourced RCM providers who can improve cash flow, increase practice productivity and efficiency and ensure accurate reimbursement.
  • Acquiring specialized expertise is a key consolidation driver. Leading healthcare RCM service providers are making strategic acquisitions to gain scale, broaden or enhance their service offerings in a niche market and increase revenue, while financial sponsors are seeking an opportunity to enter high-growth markets through RCM plays. These acquisitions in niche services enable large players to strengthen their offerings.
  • Private equity is facilitating buy and build strategies. PE firms are becoming increasingly active in the sector, finding the typical RCM business model’s offers of long-term customer relationships and high levels of recurring revenues to be very attractive in a fragmented sector that facilitates a buy-and-build strategy.
  • Sector valuations remain healthy. High buyer demand and attractive growth opportunities continue to support pricing for M&A transactions.
  • M&A activity will continue at its current level for the next 12 to 18 months. Leverage multiples are at an all-time high and capital costs remain low; demographics are ripe for consolidation; competition is driving prices higher and CEO confidence is up, all of which will continue to spur acquisition interest and deal volume.