Regulatory Risk in Healthcare M&A: FTC Scrutiny and the Aya-Cross Country Merger

The Federal Trade Commission's (FTC) ongoing review of the $615 million merger between Aya Healthcare and Cross Country Healthcare has become a case study in the escalating regulatory risks facing healthcare M&A. Initially slated to close in the first half of 2025, the deal has been pushed to the fourth quarter of 2025 due to the FTC's Second Request for information-a standard but time-intensive step in merger reviews, according to a WhatIsBluesky analysis. This delay underscores a broader shift in antitrust enforcement, where the FTC is increasingly prioritizing market concentration and anticompetitive dynamics in the healthcare staffing sector, as noted in a Panabee update.

The FTC's Focus: Market Concentration and Anticompetitive Concerns

The healthcare staffing industry, particularly the Managed Services Provider (MSP) segment, has long been a target for regulatory scrutiny. According to a WhatIsBluesky report, the top 10 healthcare staffing firms control over 53% of the market, with at least five of those firms also operating an MSP. This overlap raises concerns about conflicts of interest and reduced competition, as companies may leverage their dominance in staffing to influence broader healthcare services. The FTC's review of the Aya-Cross Country merger appears to hinge on these structural issues, even though the combined entity's market share is estimated below 20%, according to a Panabee report.

The agency's 2023 Merger Guidelines, outlined in a Day Pitney briefing, emphasize a presumption of anticompetitive harm in concentrated markets and have further tightened the regulatory environment. For investors, this signals a heightened risk of prolonged reviews or even blocked deals in sectors where market power is already skewed. The Aya-Cross Country case exemplifies how even mid-sized mergers can face significant hurdles if they contribute to broader industry concentration.

Financial Implications and Investor Sentiment

The regulatory uncertainty has already impacted Cross Country Healthcare's stock price. A Seeking Alpha report notes a 5% drop in its shares following news of the FTC's review. Such volatility highlights the financial risks associated with regulatory delays, as market participants factor in the possibility of deal collapse or unfavorable terms. For the Aya-Cross Country merger, the extended timeline-now pushing into December 2025-has forced both companies to navigate not only regulatory scrutiny but also shifting market conditions and investor expectations, as covered in a Staffing Industry report.

Moreover, the FTC's updated Hart-Scott-Rodino (HSR) rules, described in a National Law Review analysis, effective January 2025, have added complexity to the premerger notification process. These changes require companies to provide detailed information on organizational structures, competition analyses, and minority shareholder interests, increasing both the cost and duration of regulatory reviews. While the Aya-Cross Country deal has not yet been blocked, the revised HSR framework suggests that future healthcare mergers will face even more rigorous scrutiny.

Strategic Considerations for Investors

For investors evaluating healthcare M&A opportunities, the Aya-Cross Country case offers several lessons:
1. Regulatory Timelines Are Unpredictable: Delays driven by Second Requests or updated guidelines can extend closure timelines by months, impacting capital allocation and strategic planning.
2. Market Structure Matters: Deals in highly concentrated sectors, even those with modest market shares, may face disproportionate scrutiny if they exacerbate broader industry trends.
3. Compliance Is Key: Companies must proactively address antitrust concerns during negotiations, as demonstrated by Aya and Cross Country's cooperation with the FTC, per the Panabee update.

Conclusion

The Aya-Cross Country merger illustrates the evolving landscape of regulatory risk in healthcare M&A. As the FTC adopts a more aggressive stance on antitrust enforcement, investors must weigh not only the financial merits of a deal but also the broader implications for market competition. While the Aya-Cross Country transaction remains on track to close, its prolonged review serves as a cautionary tale for future mergers in an industry where regulatory scrutiny is unlikely to wane.