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Private Equity in Healthcare

By Jourik Migom, SVP and Sector Head Private Equity

 
 

As we continue to emerge from the pandemic, attention has continued to turn to sectors that have traditionally been considered defensive, such as healthcare. We’ve already seen major deals in both public and private equity, such as Microsoft’s acquisition of Nuance and Blackstone’s purchase of Medline. While there are undoubtedly opportunities out there, at the same time, any investor looking to round out their roster needs to be aware of a few key considerations that will guide their decisions.

 

Finding synergies in services through understanding the technology

 

Firstly, the healthcare sector is broad, covering pharma to medtech, to healthcare services and beyond. This provides the opportunity to build complementary, networked portfolios of companies that create a bigger picture. However, actively seeking out businesses that provide more specific or niche products or services may risk coming up against high valuations. Any investor must therefore carefully balance the value brought to the portfolio against valuations to make sure returns also follow.

Properly evaluating a prospect’s technology can be the key to this, making sure that an acquisition is the right fit and brings value with it. Anyone evaluating a deal needs to approach with a technical and product mindset, as well as understand what the impact of digital and tech is on the industry in order to properly navigate this sector.

 

Thinking glocally

 

Regulation will always be a consideration when working in healthcare. Countries may have differing regulatory environments and understanding this is central to investigating the opportunity for healthcare businesses particularly if a global expansion is the objective.

An international portfolio will serve to boost value but, sometimes, thinking ‘glocally’ may be the answer, creating an international network of regional operators. In fact, many firms are choosing to buy off-the-rack and acquire existing businesses as they stand, working with them within their markets. This allows them to derive value without having to worry about red tape for the acquirer.

 

Consumerising healthcare

 

Consumers must be front of mind of a healthcare business and there has been speculation that running a for-profit model may mean poorer care. While this is something that must always be kept front of mind, the consumerisation of healthcare may not be the challenge it’s been set up to be. On the contrary, particularly for those services that offer direct patient care, the consumerisation of health may actually allow providers to gather and leverage for improved diagnostic work and this is being recognised by private equity firms, who can see the value that can be provided if this data is brought to bear and Customer Experience is optimised across industries and portfolios.

Healthcare is often a complicated sector and subject. However, for a knowledgeable investor, who is able to understand the challenges of regulation and that places consumer and patient care at the heart of their work with their companies, there are a number of opportunities to create complementary, value-driven portfolios that can enrich the entire sector, and even provide gateways to others, such as payments.

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