While 2021 was a record year for healthcare private equity deal volume and value, the inflationary risks that emerged in 2022 as well as lingering COVID challenges have spawned storm clouds on the horizon, Oppenheimer reports.
Although healthcare services deal volume in 2022 may appear muted compared to 2021, actual deal volume increased 5% for the 12 months ending May 31 (compared to the prior period) across all healthcare services sectors, according to PWC. Investors appreciate the healthcare industry’s long-term macro trends and recession-resistant profile. New sources of capital have increasingly entered the $4 trillion sector, intensifying competition for platforms and driving up valuations.
PE returns in healthcare services have historically achieved a material premium compared to IRRs across all other industries, and platform and add-on deal activity remains strong across most health services sectors. A substantial driver of value creation in healthcare is the sector’s consistent revenue growth above inflation. The median compound annual growth rate for healthcare was 11.1% over the past decade, compared with 7.6% for all other industries (according to Bain). Read more.
