Private equity deals set record in healthcare sector

• Private equity interest in healthcare hit a record again in 2018, according to Boston-based consulting firm Bain & Company. Bain’s report on global healthcare private equity and M&A tallied 316 deals globally in 2018, a jump from 265 the year prior.
• Deal value also spiked to record levels, reaching a total disclosed value of $63.1 billion, the highest on record since 2006. The most activity was in North America, which also captured the highest values. The deal roundup includes the pharmaceutical and device sectors.
• One of the largest deals in 2018 was private equity firm KKR’s buyout of physician services provider Envision Healthcare for nearly $10 billion. Another deal to make Bain’s top-10 list included a European deal in which Recordati, a drugmaker, was purchased for $7.4 billion.

Fueling the 50% increase in total deal value from 2017 was the sheer size of the buyouts. Eight deals in 2018 were valued at more than $2 billion each, according to the report. The four largest deals of 2017 were public to private transactions.

Private equity in healthcare is not expected to slow down in 2019, according to Bain and other experts with a pulse on the sector.

“We expect competition for assets will not likely decline in the near future. For all of these reasons, 2019 should be another banner year for healthcare private equity,” Bain reported.

Credit: Bain & Company

Despite flashes of a potential recession and other sociopolitical uncertainty, demand for these deals will remain strong, according to the report.

“Returns in healthcare PE markets have proven resilient through such storms in the past, however, and Bain & Company is confident that investor demand for these fundamentally strong, recession-resistant assets will endure,” the report said.

Private equity investors are looking for deals in areas that are highly fragmented, areas that still operate in silos and are undercapitalized, Healthcare Dive previously reported. Fragmentation provides a means for private equity to come in and align practices on the same platform, in an effort to increase size and scale.

PE firms may be taking a closer look at orthopedic practices and mental health services for deals, along with other areas of the healthcare sector.

Bain noted that investors are seizing a few trends in healthcare as they look at future dealmaking, including the aging population and potential outside disruptors like Amazon. Funds are also looking to lower-acuity and retail care settings.

Areas of interest in the IT sector include revenue cycle management platforms for hospitals. Clinical decision support is also a space to watch, though no major deals in that area were completed last year, Bain said.

https://www.healthcaredive.com/news/private-equity-deals-set-record-in-healthcare-sector/553042/