M&A activity in healthcare has declined this year — and so too has consolidation among healthcare marketing firms. That’s according to high-profile industry observer Claudine Cohen, a managing principal and leader of CohnReznick’s Transactions and Turnaround Advisory practice.

In the few years leading up to the COVID-19 pandemic, healthcare M&A activity was robust and, as such, signaled that industry valuations were high. However, according to a recent KPMG report, healthcare M&A deals declined 34% between Q4 2021 and Q1 2022. 

And as goes healthcare, so goes its marketing firms. 

Asked to assess the healthcare marketing space, Cohen said that there has been a cool-off two years into the pandemic.

The outbreak, which initially caused widespread tumult, spurred consolidation among firms. Many healthcare marketing veterans who had survived previous recessions, she noted, opted to sell their businesses — to get out while the getting was still good, so to speak.

While there has been recent M&A activity in the healthcare sector, Cohen said there hasn’t been as much consolidation on the marketing side compared to last year.

“A lot of the momentum that healthcare marketing had coming out of COVID might have just gone down to more or less of a normalized level,” she explained. 

The trendlines for the rest of the year may not be clear, but a puzzling dynamic now faces the industry: What happens if consolidation picks back up again? And what will it mean for small or medium-sized agencies seeking to remain independent?

As COVID becomes endemic, a cloud of uncertainty is lifting, Cohen noted. That’s likely to result in a more stable market over the next 12 to 24 months.

Her advice for smaller firms that aim to remain independent is to focus on specialized offerings that differentiate them from the competition. Instead of being all things to all people, these firms may be better off emphasizing their perceived value and cementing their relationships with established customers.

“You’ve got to find those areas where you can add value and differentiate yourself,” she said.

Looking ahead, Cohen said the influx of stimulus money to healthcare organizations salvaged the bottom line from damage due to the pandemic — but also put marketers in a tight situation. 

While not all healthcare marketing is considered discretionary spending — especially after the volatility of the macro economy over the past few years — Cohen said brands are likely to be much more deliberate about executing on their spending plans. 

Cohen also suggested that multi-year projects that previously enjoyed organizational support may get put on the backburner in favor of more pressing priorities.