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Private Equity Finds Sweet Spot in Diversified Healthcare Deals

March 28, 2019, 09:15 AM
Filed Under: Industry News
Related: Healthcare, PwC

For years private equity firms have invested in healthcare, but now the pace is quickening as they step up their presence in a highly fragmented health industry, seizing on consolidation opportunities to build a better business model, according to a new report from PwC.

Private equity’s acquisitions and investments in the health sector have become increasingly diversified and frequent; they include such things as new entrants in technology and convenient care delivery, clinical research organizations, and ophthalmology and dermatology practices. Analysts expect this trend to accelerate in 2019, giving traditional healthcare companies opportunities to sell all or portions of noncore assets and double down on their core competencies, or partner with private equity in acquisitions in which they would otherwise be competing against each other or unable to act on their own.

A private equity sector bursting with cash and searching for deals means more of that money has flowed into the healthcare system over the past decade. In 2009, private equity firms completed over 200 healthcare deals, and by 2016 this had tripled to more than 600 deals.

The healthcare industry saw a high level of deals in general in 2017 and 2018, involving both private equity and corporate buyers. As those deals are completed, many may be looking to sell noncore business units, prime targets for private equity firms looking for a proven business model and solid cash flow.1,2 Private equity’s purchases of healthcare divestitures are expected to continue in 2019 as the sector looks to invest the cash it has raised, a reported $624 billion ready for investment across industries as of July 2018.

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