Healthcare Private Equity in 2025: Navigating the Pause with Amber Walsh of McGuireWoods LLP 4-16-25

Summary

Becker Private Equity & Business Podcast: Detailed Summary

Episode Title: Healthcare Private Equity in 2025: Navigating the Pause with Amber Walsh of McGuireWoods LLP
Host: Scott Becker
Release Date: April 16, 2025

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In this insightful episode of the Becker Private Equity & Business Podcast, host Scott Becker engages in a comprehensive discussion with Amber Walsh, a seasoned leader in the healthcare and private equity sectors from McGuireWoods LLP. The conversation delves deep into the dynamics of the healthcare private equity deal market as of early 2025, exploring themes of cautious optimism, market volatility, and strategic pauses in deal-making.

Introduction to Amber Walsh and the Current Market Landscape

Scott Becker opens the episode by introducing Amber Walsh, highlighting her expertise in analyzing quarterly data from various sources to assess trends in healthcare private equity. Amber provides an overview of the Q1 2025 healthcare private equity deal market, describing it as a "mixed bag" where cautious optimism persisted throughout the quarter, mirroring sentiments from late 2024 and early 2025.

Amber Walsh [01:28]: "The theme for Q1 all the way through the end of March was the continued cautious optimism that was the theme throughout much of 2024 and early 2025."

Q1 2025: Activity and Emerging Trends

Amber elaborates on the data, noting that while overall deal numbers aligned with expectations when compared to 2024, certain sectors like hospitals, digital health, and technology experienced a slowdown. She references reports from ECG, Alpha Bridge, and KPMG, which indicate an uptick in the number of deals and exits in healthcare private equity, suggesting robust activity in the first quarter.

Amber Walsh [02:15]: "The number of deals are up there. Alpha Bridge is across the board P.E. not just health care. Number of exits up, KPMG's M&A report in terms of shared dollars in healthcare deals up again."

However, as Q1 progressed, a sense of discomfort and volatility began to permeate the market, leading to pauses in ongoing deals. Amber notes that this shift is not unexpected given the broader economic uncertainties.

Amber Walsh [03:57]: "There's been a little bit more pausing midstream on some deals that were in motion. Definitely feeling of insecurity with volatility."

The "Pause" Phenomenon: Interpretations and Implications

A significant portion of the discussion centers around the concept of the "pause" in deal-making. Scott Becker probes into how this term is perceived differently by buyers and sellers, with potential implications for future transactions.

Scott Becker [05:17]: "The pause, it seems to be a phrase we're hearing all the time right now. And how do buyers and sellers take that phrase?"

Amber explains that the "pause" often signifies a period of strategic reassessment rather than a definitive halt. She emphasizes that many paused deals may resume without major changes, as stakeholders evaluate factors like valuation comfort and risk assessment.

Amber Walsh [05:47]: "I suspect that of the ones that I'm involved in that have taken more of a private pause, I guessing at least half of those will come back online again and not even with a reprice or any major change. Just waiting to see."

Economic Uncertainties and Recession Testing

The conversation shifts to broader economic concerns, particularly the anticipation of a potential recession and its impact on healthcare private equity deals. Amber highlights that recession testing is a critical component of current deal evaluations, with parties scrutinizing how their investments would withstand economic downturns.

Amber Walsh [07:31]: "What does our customer patient base look like in our particular business and what will they continue to use our product even in healthcare, where a lot of healthcare is elective and is plausible."

She also references rising consumer loan delinquencies and the uncertainty surrounding tariffs and Federal rate adjustments, all of which contribute to the cautious stance observed in the market.

Amber Walsh [05:17]: "We've got, you know, May 7th is the next time that the Fed is supposed to react on rates. We have a lot of, you know, we've got the 90 day pause in tariffs."

Sector-Specific Impacts: Focus on Hospitals and Health Systems

Amber points out that the hospital and health systems market is particularly affected, with smaller and rural hospitals facing significant challenges. Larger health systems are grappling with reimbursement stresses from Medicaid, Medicare, and Medicare Advantage programs, making acquisition and consolidation a more complex endeavor.

Amber Walsh [08:42]: "The hospital and health systems market that is particularly chilled."

Scott Becker adds that smaller hospitals are struggling more than their larger counterparts, which have to manage increased financial pressures and potential operational disruptions.

Scott Becker [09:15]: "You see some of these smaller hospitals, rural hospitals really in trouble and bigger systems more concerned about picking up the pieces given stress on their own reimbursements."

Looking Ahead: Potential Outcomes and Future Discussions

As the episode wraps up, Amber acknowledges the fluidity of the current market and the possibility that many paused deals may resume once economic conditions stabilize. She suggests revisiting the topic in future episodes to assess whether the anticipated "pause" transitions into a renewed period of deal activity.

Amber Walsh [09:30]: "We can come back and talk about it and see if any of these predictions ring true, if the pause becomes an unpause."

Conclusion

Scott Becker concludes the episode by commending Amber Walsh for her valuable insights and expertise in navigating the complex landscape of healthcare private equity. He highlights her roles within McGuireWoods and her influential position in the industry, underscoring the depth of knowledge she brought to the discussion.

Scott Becker [09:45]: "Amber Walsh, former leader of the healthcare department at McGuire Woods Council of the Physician Hospital association, also serves in the executive committee of McGuire Woods. Incredible leader."

Key Takeaways:

• Cautious Optimism in Q1 2025: Despite initial positive indicators, emerging economic uncertainties are causing stakeholders to pause and reassess ongoing deals.

• Interpretation of "Pause": The term signifies a strategic halt rather than a definitive stop, with many deals likely to resume pending favorable conditions.

• Recession Concerns: Potential economic downturns are prompting rigorous recession testing of deals, affecting investment decisions and valuations.

• Sector-Specific Challenges: Hospitals and health systems, especially smaller and rural ones, are experiencing heightened financial pressures, influencing private equity interest and activity.

This episode provides a nuanced understanding of the current state of healthcare private equity, emphasizing the importance of adaptability and strategic planning in an unpredictable economic environment. For listeners interested in the intricacies of private equity within the healthcare sector, Amber Walsh's expert analysis offers valuable perspectives on navigating the challenges and opportunities that lie ahead.

Transcript

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This is Scott Becker with the Becker Private Equity and Business Podcast. We're thrilled today to be joined by Amber Walsh. Amber's a leader in the healthcare and private equity sector and no great change. Today. She's going to report to us on what's going on in the health care private equity deal market and what she's seeing and what the data is showing. Amber, why don't you take a second and introduce yourself and then let's dive into what you're seeing in the health care private equity deal market.

[Amber Walsh]

Yeah. Thank you, Scott. Like you said, Amber Walsh, health care transactions partner at McGuire woods and I love looking at all the data that comes back in every quarter reported from a variety of sources. And it's all crunched in different ways by different kind of reporting bodies. I love looking at that and comparing it to one, what we were expecting coming into that particular quarter and two, what it feels like now that we're well into the quarter after. And I think it's a mixed bag from Q1 2025, health care private equity dealmaking. I think the theme for the true Q1 all the way through the end of March was the continued cautious optimism that was the theme throughout much of 2024 and early 2025. The data kind of plays out. I'll share that in a minute. But just in the past several weeks, there's been more discomfort. There's been a little bit more pausing midstream on some deals that were in motion. Definitely feeling of insecurity with volatility. None of that should be surprising to anyone. We all see it. It's the biggest talked about concept in the news and the market reactions and it's playing out that way in this early part of Q2. But Q1 did end up so as you compare Q1 2025 numbers to 2024, they are as expected outside of the hospital market which was pretty chilled and a couple of other sectors, digital health and technology but depending on whose report you're looking at, ECG has a healthcare M and a report on number of deals. They also have a healthcare private equity component. The number of deals are up there. Alpha Bridge is across the board P.E. not just health care. Number of exits up, KPMG's M&A report in terms of shared dollars in healthcare deals up again. But like I said, that only tells part of the story. But at least that was reflective of more activity in Q1 before we really hit the end of Q1 where people started to get a little bit more nervous again.

[Scott Becker]

Right. And what are you seeing now? Because again like B of A just reported very nice numbers for the first quarter but there's a lot of caution bleeding into the second quarter from everybody given the trade uncertainty and so forth. What are you hearing directly from investors about deal flow and what they're seeing or is there just an abundance of caution?

[Amber Walsh]

It's an abundance of caution but no one is willing to go too far out on a limb in either direction excessively negative or positive. And you can't blame anyone. It feels very, very unstable at the moment. But from my perspective because I'm always look on the bright side person, I'm pleased with how the insecurities kind of playing out in the deals that are pausing. They're not big public proclamations of a pause in deal making. These are we're talking about healthcare private equity deals where the lender, the sponsor, sometimes even the seller and the investment banker are wanting to just hey, let's just wait and see. But nobody's giving up exclusivity. It's not a big dramatic party and we're never going to do this deal. It's just we need to wait and see what's going to happen a little bit.

[Scott Becker]

But isn't that so interesting that that seems to be the phrase of the day, the pause it that means very different things to different people. If you're a buyer it may mean a pause, it may mean that you're really walking away. If you're a seller it might be the same thing that you're that this is now time to move on versus is it really, you know, is It I'm so happy to hear you use that phrase, the pause, because it seems to be a phrase we're hearing all the time right now. And how do buyers and sellers take that phrase?

[Amber Walsh]

Yeah, you're absolutely right. It can mean different things for different deals. And I suspect that of the ones that I'm involved in that have taken more of a private pause, I guessing at least half of those will come back online again and not even with a reprice or any major change. Just waiting to see. We've got, you know, May 7th is the next time that the Fed is supposed to react on rates. We have a lot of, you know, we've got the 90 day pause in tariffs. We've got lots of things that both sides are kind of looking at to assess during the pause. I don't think the pause is we're going to do nothing. It's we're really going to think about this and make sure we were real comfortable on valuation, make sure we were really comfortable on where our risk points were. If the, you know, the trade wars continue the way they are, what might, how might that impact us from where we get our implants, you know, whatever it is, depending on the business. But I think that's going to happen during the pause and then many will come back online. But it's certainly not a one size fits all situation for these deals.

[Scott Becker]

No, I think that that's really an interesting take on it. And I think there is how much do you hear people talking about recession testing? Whenever you go through a deal, everybody always looks at what's this going to look like in a recession. And then of course, when you have a point again a couple weeks ago where the market drops 15%, you have a correction 20%. Now it's rebounded. Some people think, oh my God, the fear is really real. So instead of thinking abstractly, we really have to look at this deal in terms of what happens in a recession. How much of that discussion is going on?

[Amber Walsh]

Absolutely is going on. And you have all that, you know, on top of everything else that you just mentioned, you have these other economic dynamics of consumer loan delinquencies are at the highest they've been in a decade. And that plays into that. You know, what does our customer patient base look like in our particular business and what will they continue to use our product even in healthcare, where a lot of healthcare is elective and is plausible. We saw that during COVID So I think a lot of that is going on during these periods when folks felt really good coming into 2025, very optimistic. But now just need to kind of think about it and make sure they're not getting totally out ahead of themselves and you know, are going to fall off a cliff with their, with their acquisition.

[Scott Becker]

No, thank you very, very much. I think that's really the concern is not that you're going to have minor changes, but is it going to fall off the, the edge when things go south? I think that's exactly right. You know, that's exactly right in Amber. Anything else you're seeing that you wanted to comment on?

[Amber Walsh]

Yeah, I mentioned earlier the hospital and health systems market that is particularly chilled. Kauffman hall has a really good quarterly report that was, is particularly down right now. But I think, you know, always the opportunity to come back there too. But as you kind of break up some of the deal activity that really was pretty strong in Q1 and you start to look at it at a subsector basis. That's one that really sticks out.

[Scott Becker]

Thank you very, very much. That's very interesting. You see some of these smaller hospitals, rural hospitals really in trouble and bigger systems more concerned about picking up the pieces given stress on their own reimbursements, Medicaid, Medicare, Medicare Advantage and a lot more.

[Amber Walsh]

Yeah, exactly. Exactly. So we're still, you know, we will wait and see and we'll see where we are a month from now. We can come back and talk about it and see if any of these predictions ring true, if the pause becomes an unpause.

[Scott Becker]

Fascinating as always. Amber. Thank you so much for joining us today on the Becker Private Equity and Business podcast. Again, Amber Walsh, former leader of the health care department at McGuire Woods Council of the Physician Hospital association, also serves in the executive committee of McGuire Woods. Incredible leader. Thank you so much for joining us today.

[Amber Walsh]

Thank you, Scott.

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