At long last, the U.S. healthcare deal market has warmed back up. An uptick and sustained flow of M&A activity is offering private equity investors a renewed reason for optimism in 2026.
While this continues to be welcome news, recent healthcare exits data tell a more nuanced story. Hold periods are still long, with the average now spanning approximately 6.2-6.6 years, slightly more than the cross-sector mean, according to SPG Global. What’s more, these transactions still stall more than most investors expect, with failed exits slowing the return flow of capital to LPs.
This information indicates that lingering uncertainties — notably, reimbursement concerns and the high cost of capital — continue to constrain the healthcare deal market. As a result, it won’t soon be returning to the hyper-frothy environment of 2021-2022, when engaging a banker alone could spark a bidding war.
This reality requires healthcare investors to temper their optimism with risk mitigation strategies surrounding exits to best ensure they achieve desired multiples. Such work requires highly intentional pre-exit preparations that expertly engage portco management teams who can propel or pose the most risks to near-term exits.
Best practices include:
Set expectations.
Just as private equity investors risk becoming overconfident amid today’s surge in dealmaking, top management can also be unrealistically bullish, letting anticipated payouts and aspirations for their organizations run away with them. To keep these visions from colliding with reality and creating emotional responses that can lead to stalled deals, investors should help leaders index to realistic exit scenarios. They should promote flexible mindsets and work toward a range of exit options that account for potential changes in market dynamics, organization health, and company performance.
Align through storytelling.
Storytelling serves as an extremely powerful tool, even among close and familiar business audiences. By aligning management leaders around clear, compelling value creation narratives backed by data, investors can best ensure the C-suite is in sync, working diligently and deliberately toward a desired exit outcome, instead of operating at cross purposes, a scenario that is often more typical than not. Investors should further ensure the story they compose and communicate encompasses both the current investment period and the next phase of the organization, building a continuum that potential acquirers will remember and value.
Focus on retention.
Nothing erodes a portco’s value like a C-suite leader departing during a pre-exit period. The exodus inevitably spooks potential acquirers, raising questions about what’s driving them to walk away from a near-term payout. To mitigate this risk, investors must focus strongly on executive management retention. They must be highly accessible to their CEOs, COOs and CFOs during the pre-exit phase, and attuned to the pressure that leaders might feel to ensure their long hours away from home are ultimately worth the time they have invested. Given that this calculus can change as hold periods get longer, investors should not assume that even creative and generous compensation packages are enough to keep leaders at the helm.
Beyond these C-suite-focused exit preparation strategies, healthcare investors should remember and evangelize the importance of investing in and operating their portcos like they intend to hold them forever. This requires that they resist the pressure to tinker with their balance sheets in ways that might appeal to potential acquirers. Maintaining an outlook that focuses on long-term value creation above all else will ultimately serve as the most powerful springboard to a high-multiple exit and lay the strongest possible foundation for the organization’s next chapter.
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Matt Brubaker, EdD
Matt Brubaker, EdD serves as Chairman and CEO of FMG Leading, a human capital advisory firm that partners with executives and investors on a mission to make healthcare work, better.
Will Busch, III
Will Busch, III is President of FMG Leading, a human capital advisory firm that partners with executives and investors on a mission to make healthcare work, better.
