Healthcare PE Deals Reached $90B in 2022, Near Record Levels
The report, Healthcare Private Equity Outlook: 2023 and Beyond, noted the sector remains resilient despite a downturn in the second half of 2022. Biopharma and life sciences as well as value-based care and artificial intelligence are areas to watch in 2023. Six of the top 10 deals last year were in biopharma, life science tools and related services, Bain found.
Deal value reached more than $90 billion, which is down from $151 billion in 2021, but still above amounts reported in previous years. Bain also highlighted a good amount of dry powder available and a track record of gains that attracts healthcare specific funds. Funds are tapping into new sources of capital with an eye on carve-outs and public-to-private deals.
“Healthcare private equity has earned a recession-proof reputation, typically outperforming overall private equity activity during economic downturns,” said Kara Murphy, co-lead of Healthcare Private Equity at Bain & Company. “While the space is resilient, investors will face continued challenges ahead as interest rates and labor costs continue to climb, and credit continues to be tight.”
Within biopharma, life science tools and related services, more than 600 healthcare buyout deals have been completed over the past five years globally. This year the bar is high for investors to win the right deals as the competition remains strong and valuations have been higher, according to the analysis.
This year presents several challenges and opportunities for private equity funds in the space although uncertainty remains around exits related to the SPAC and IPO market as well as debt financing related to healthcare companies. Still, Bain analysts remain upbeat on the sector.
“Experienced life sciences investors are starting to consider earlier-stage assets,” they wrote. “Sponsors with limited life sciences experience are building expertise and deal theses in targeted areas like biopharma IT.”
Bain sees continued promise despite possible headwinds for healthcare investors due to macroeconomic uncertainty. They reiterate that while the sector is down it should not be counted “out.”