Private equity firms invest record $150 billion in healthcare sector

28 March 2022 3 min. read

The private equity market closed deals worth more than $150 billion in the global healthcare sector in 2021, an absolute record for the industry, according to a new report by Bain & Company.

In the twelve months of 2021, total disclosed healthcare deal value more than doubled to $151 billion from $66 billion (in 2018: $64 billion), on the back of 36% more deals, up from 380 in 2021 to 515 last year.

According to Bain & Company’s research paper, the record number of deals stemmed partly from a pandemic-induced backlog of parked deals, as well as the revival of megadeals headlined by the $34 billion Medline deal and the $17 billion acquisition of Athenahealth.

Healthcare private equity rebounded to a banner year

Three others megadeals worth more than $5 billion closed last year (Parexel International and Inovalon in the US and Cerba HealthCare in Europe), and as a result, the average disclosed deal value soared 134%. In comparison, in 2020 only one deal worth over $5 billion closed.

North America retained its position as the largest market for deal value, the region also reclaimed the top ranking for private equity deal volume from Asia-Pacific. Deal count in 2021 rose to 216, up from 142 in 2020. Disclosed value surged to $108 billion from $35 billion and was more than twice the previous high of $46.7 billion in 2019.

Healthcare deal activity grew in every region

In Europe, deal count rose to 112 in 2021, a record, from 75 the year prior. Disclosed value also jumped to $26 billion from $14 billion, surpassing the previous high of $19.7 billion in 2019. In Asia Pacific, China contributed 66% of the region’s deal volume, which ended the year at 179 from the previous record of 156 in 2020.

The Covid-19 pandemic not surprisingly was the foremost driver of healthcare deals, but according to Bain’s researchers, a range of other factors also contributed significantly to the record levels.

Healthcare megadeals rebounded to a record year

“Several structural trends continued to benefit healthcare companies. An aging population, the rising incidence of chronic illness, rising income levels and healthcare access in emerging markets, and digital innovations in treatment and operational processes combined to boost underlying demand for an array of healthcare goods and services,” states the report.

At the side of financial sponsors, a huge stockpile of ‘dry powder’ (private equity capital that is waiting to be invested) – around $3.3 trillion – has helped boost the number and value of healthcare buyouts.

The growing competition for high-quality is luring new players into the market, such as infrastructure, pension funds, hedge funds, and sovereign wealth funds. In this slipstream, the number of healthcare-focused funds initiated in 2021 reached a record (358) and so did total capital raised, reaching roughly $93 billion.

The number and size of healthcare-focused private equity funds has grown dramatically in recent years

Commenting on the outlook for 2022, Nirad Jain and Kara Murphy, Healthcare Private Equity leaders at Bain & Company, stated: “Healthcare is enduring a period of discontinuity on several fronts, from the continued Covid-19 pandemic and the fallout from the Ukraine conflict, to digital-driven disruption and more.”

“No one can foresee the implications of these discontinuities in detail. Rather, the uncertainties inherent in a time of flux raise the importance of thorough diligence and early planning for value creation. Investors and executives of portfolio companies can benefit by regularly revisiting their portfolios.”