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Private Equity and Healthcare Have A Promising Future Together

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Private Equity and Healthcare Have A Promising Future Together

In 2020, private equity (PE), like the rest of the economy, faced serious obstacles as a result of the global pandemic. Despite the extent of the disruption caused by Covid-19 and the lockdowns enforced in most countries, buyers and sellers were able to close deals swiftly and healthcare showed remarkable resilience. Despite a 14% drop in overall global PE operation, the number of healthcare private equity transactions increased by 21% to 380 in 2020, up from 313 the year before. Private equity players in the healthcare sector are searching for resilience and continuity in 2021, as hospitals are once again at breaking point due to the biggest surge in Covid-19 cases yet.

Implications of COVID-19

According to the Thomson ONE database, the number of health-care private equity transactions disclosed in the United States has gradually risen, reaching a high of 94 in the first quarter of 2018. Despite significant declines in other national financial indices, health-care private equity investment has remained relatively active throughout the pandemic.

There were 86 transactions in the fourth quarter of 2020, which is more than every other fourth quarter of the last 20 years. The 153 health-care private equity transactions revealed in the second half of 2020 span a wide variety of health-care subsectors, including 64% suppliers and facilities, 20% equipment and supplies, 6.5 % pharmaceuticals, 5.2 % hospitals, and 3.3 % biotechnology.

The financial pressure that hospitals and physician practises are facing is one aspect that could speed up private equity acquisitions in health care. Hospitals and health systems have lost billions of dollars in income, with small and rural hospitals bearing a disproportionate share of the losses. For immediate access to capital, vulnerable hospitals can turn to private equity. Similarly, despite modest federal funding, many physician practises, especially in primary care, are struggling financially.

The latest emphasis is on digital health

Private equity companies are seeing digital health as a potential investment opportunity in care delivery, in addition to acquiring physician practises. In 2020, digital health companies in US are expected to raise $12 billion in private equity and venture capital, the largest annual sum earned in the last decade.

In 2021, as digital health and technology solutions spring up, investors will focus on life science companies and care providers as key stakeholders for investment.

There are some of the most promising fields for health technology in life sciences:

  • Risk-based monitoring
  • Medical information solutions
  • Real-world evidence research design
  • Regulatory reporting
  • Electronic clinical results evaluation (eCOA)

Digital and health technologies are being used by care providers to build opportunities in these areas:

  • Medical equipment monitoring
  • Contract and record management
  • Financial reporting
  • Revenue-cycle management
  • Patient protection and quality reporting systems

A surge of domestic innovation is propelling healthcare PE in Asia-Pacific

In the Asia-Pacific region, small venture healthcare assets are developing into growth equity opportunities for investors. As a result, the number of buyouts increased dramatically in 2020, from 68 in 2019 to 156 in 2020. The value of disclosed assets reached a record high of $16.9 Bn, up from $11 Bn the previous year.

Biopharma was the most active market, with China accounting for nearly 60% of all deals in the region. Investors are increasingly focused on domestic biopharmaceutical and medtech innovation, especially in China, where the government has provided various incentives to help local companies grow.

Small venture healthcare assets in the Asia-Pacific region are evolving into growth equity opportunities for investors. As a result, the number of buyouts rose sharply in 2020 to 156 deals, compared with 68 in 2019. Disclosed values shot up to a new high of $16.9 billion, compared with $11 billion the prior year.

An ageing population, more affordable care, a transition to universal healthcare coverage in markets like India, and the rapid adoption of digital health solutions also contribute positively to the industry.

Why the profit pool should keep growing

In a wider sense, healthcare firms continue to benefit from favourable structural patterns, which support the case for a reasonably quick return to previous levels and demand growth trajectories as the pandemic crisis fades. It is estimated that in the next five years, an ageing population, increasing chronic disease prevalence, rising income levels and healthcare access, treatment and technology innovation, and potentially moderate pricing growth will combine to increase healthcare profit pools by around 5% annually.

Legislative and regulatory threats, particularly in the aftermath of the pandemic, may certainly cloud the picture. Nonetheless, most countries’ existing healthcare systems are unlikely to be completely overhauled. Instead, a combination of continued pricing growth that outpaces inflation, increased demand, and the emergence of new business niches for companies to pursue is anticipated.

In order to succeed in this environment of rising valuations and fierce competition, investors will need to adapt their deal theses. Those who can predict the potential consequences of Covid-19 and ride the wave of healthcare as a national defence would be the winners of healthcare private equity.


  1. https://medcitynews.com/2020/02/what-will-private-equity-investment-in-healthcare-look-like-in-2020/
  2. https://jamanetwork.com/channels/health-forum/fullarticle/2777170
  3. https://www.mondaq.com/uk/healthcare/983174/covid-19-strengthens-private-equity-focus-on-healthcare
  4. https://www.bain.com/insights/year-in-review-global-healthcare-private-equity-and-ma-report-2021/
  5. https://www.bain.com/insights/2021-and-beyond-global-healthcare-private-equity-and-ma-report-2021/
  6. https://www.lexology.com/library/detail.aspx?g=13231d30-685d-4eb9-bea6-c0f0303fe8a1
  7. https://www.bain.com/globalassets/noindex/2021/bain_report_global_healthcare_private_equity_and_ma_2021.pdf

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