Upswing in Private Equity Investments in Healthcare Industry

The last decade saw investments by private equity firms in the healthcare sector balloon to record highs and according to experts, this new decade will not be any different. The analysts project a surge in investments in addiction treatment, mental health, and orthopedics.

In the US alone, PE deals in healthcare have more than doubled, according to financial data company Pitchbook. One of the most significant healthcare investments in the recent past is one by KKR, a $10-million injection into the purchase of Envision Healthcare. Around the same time, Evergreen Coast Capital and Veritas Capital took over Athenahealth in a public-private partnership deal.

In the face of global instability, last year’s healthcare industry deals by private equity hit a record $78.9 billion, made up of 313 deals, down from 2018’s 316.

Bain & Company’s Healthcare private equity practice co-leader  Kara Murphy in a statement said: “With valuation multiples arguably near a high, the bar is rising to invest and deliver differentiated deal returns in healthcare private equity,” adding “Funds will need to think proactively and creatively about their investment theses and put in a lot of hard work on value creation plans to deliver.  We are cautiously optimistic that investors that put in this hard work will continue to achieve industry-leading deal returns in the vibrant healthcare industry.”

Several variables contribute to the immense investments in the sector, mainly a growing need for healthcare. This primarily emanates from an aging worldwide population, treatment and growing incidences of chronic illnesses. Also, the rising levels of dry powder or uncalled capital need to be put to work. More individual and PE funds are investing in healthcare, given how well the sector held during the last recession as well as the current global COVID-19 pandemic.

As predicted by industry experts, last year was a period of continued investment in the healthcare sector. There’s no doubt that this year will provide more of the same, notwithstanding the current economic slowdown.

The entrance of PE into the healthcare industry will certainly prompt efficiency in the sector, resulting in long-term success while boosting healthcare service businesses’ valuations.

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