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Healthcare remains one of the most attractive sectors for private equity. With strong demand drivers, a fragmented provider landscape, and the promise of scale, the space has drawn billions in investment capital. But behind the optimism lies a harder truth: valuations across many segments of healthcare have reached levels that are difficult, if not impossible, to justify.
As a pharmacist, founder, CEO, and board member who has built, scaled, and exited one of the largest independent behavioral health pharmacies in the country, I have seen both sides of the table. Since my exit in early 2023, I have worked closely with private equity funds as an advisor and operator. What I have learned is clear: we are in a healthcare bubble.
There is a tremendous amount of dry powder in the market. Funds are routinely bidding 12 to 16 times EBITDA for healthcare assets. On paper, that may seem justifiable given growth trajectories. In reality, it is often unsustainable.
Here is where nuance is required. I would argue that companies with single-digit millions in EBITDA can sometimes justify higher multiples. These smaller platforms are often easier to grow, and there is a clearer path to two to three times value creation during the hold period.
But when a company is generating $30 million in EBITDA and trades at a 15x multiple, you are already approaching a half-billion-dollar valuation. To turn that into $1.5 billion requires extraordinary growth and flawless execution in a sector that is anything but simple. That is almost impossible.
I do not say this lightly. I say it as a pharmacist, a CEO, a founder, an advisor, a private equity board member, and now a consultant to rapidly growing healthcare companies.
Healthcare is not SaaS. It is not AI. It is not software. It is and always will be a highly physical and operationally intensive business.
Scaling revenue from $100 million to $300 million isn’t a matter of simply adding technology or wringing out more efficiency. It requires significant capital investment, a robust compliance infrastructure, and disciplined operational execution. And when private equity evaluates a $300 million company with the expectation of tripling it again, the leap is often viewed as unrealistic.
Too many investors are falling into what I call the Patagonia Vest Effect. A deal looks attractive on paper, numbers are polished, and investors assume the business can scale like a technology company. But healthcare businesses built by entrepreneurs are already lean and efficient. The easy levers are gone.
To triple size from there requires significant reinvestment, heavy operational lift, and exposure to risks that most funds underestimate. When this reality collides with 15x entry multiples, delivering two to three times returns becomes nearly impossible.
We are in a healthcare bubble. Multiples need to come back down to single digits. Outbidding one another at inflated prices does not create value. It erodes it.
The danger is not just to funds and limited partners. Overpaying for healthcare assets can destabilize organizations, erode employee morale, and ultimately harm patients. Entrepreneurs may win on exit day, but without discipline, the long-term consequences ripple far beyond the balance sheet.
This is where Workshop Strategy steps in.
The company you acquire is never the same company once private equity owns it. Recognizing that fact is the first step toward creating real value.
Healthcare is not software. It is not technology. It is a regulated, capital-intensive, compliance-driven industry that requires expertise, patience, and discipline to scale.
We are in a healthcare bubble. But with the right diligence, the right valuation discipline, and the right advisory guidance, private equity funds can navigate this market wisely and still create exceptional returns.
At Workshop Strategy, I bring the unique perspective of a founder, pharmacist, CEO, exited entrepreneur, and advisor to help funds cut through noise and see reality. If you are evaluating healthcare opportunities and want to ensure discipline in both valuation and growth planning, let's talk.
"There is no rulebook. There’s only experience"
Sam Maddula, Pharm D.
CEO & Founder, Workshop Strategy
