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Market uncertainty reshapes private equity healthcare deals

Public-to-private transactions and carve-out deals within the private equity healthcare space tripled last year amid an increasingly challenging market landscape, according to a report by Institutional Investor.

Citing a new study by Bain & Company, it noted inflation and uncertainty are now pushing PE firms to do all-equity and club deals and other creative strategies within healthcare.

Public-to-private deals and carve-outs grew from 12% of all private equity healthcare deals in 2021 to almost half – 46% – last year.  In contrast, PE firms buying private companies directly shrank from about 50 percent of all deals in 2021 to less than 10 percent in 2022.

In terms of financing strategies, PE firms in healthcare have begun to gravitate toward all-equity deals and club deals, in which they pool their assets with other PE firms to acquire a company. They have also shown more interest in using debt-financing from private credit firms to complete large buyouts.

Despite the sharp market downturn in 2022, M&A activity within healthcare remained steady.  The value of global deals in the sector topped $89 billion last year, the second-highest annual figure on record. According to Bain, the resilience in dealmaking can largely be attributed to sponsors in healthcare becoming more specialized and innovative.

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