New PESP research identifies trends in private equity healthcare investments in 2023
Report finds PE activity in healthcare sectors high, despite high interest rate environment
March 6, 2024
The Private Equity Stakeholder Project (PESP) has released its latest report, providing an in-depth analysis of private equity dealmaking in the healthcare sector throughout 2023. Titled “Private Equity in U.S. Healthcare: Trends in 2023 Deal Activity” the report delves into key trends shaping the industry and raises important considerations for policymakers, regulators, and patients.
Historically, healthcare has been an attractive space for private equity investment due to its steady demand, aging population, and fragmented subsectors ripe for consolidation. Despite macroeconomic challenges impacting various sectors in 2023, including high interest rates and labor shortages, private equity activity in healthcare remained notable.
According to the report, PESP identified a total of 1135 unique deals last year, encompassing 148 buyouts, 259 growth or expansion investments, and 728 add-on acquisitions to 422 unique platform companies. These transactions involved approximately 675 private equity firms, venture capital firms, and other investors, indicating sustained interest around private investment in the healthcare space.
Some firms stood out for their active participation, with at least 22 private equity firms executing 10 or more healthcare deals in 2023. Among them, Quad-C Management led the pack with 31 add-on acquisitions.
Key subsectors attracting significant investment included outpatient care, dental care, health IT, and medtech. Additionally, biotech, pharmaceuticals, and medical aesthetics emerged as hot areas for dealmaking.
However, the report also underscores concerns regarding private equity’s growing presence in healthcare. The PE business model, centralized on the pursuit of outsized returns over short periods, may lead to cost-cutting measures that impact patients and workers negatively. Moreover, reliance on debt financing poses challenges, particularly amid rising interest rates, as evidenced by bankruptcies of major private equity-owned healthcare companies in 2023.
In light of these risks, the report calls for closer scrutiny of private equity acquisitions in healthcare by regulators and lawmakers. It advocates for the implementation of policies to safeguard access to affordable and quality healthcare for all patients in the United States.
For more information and to access the full report, visit pestakeholder.org/private-equity-healthcare-2023-trends
