Investors continue to pour money into health care sector even in an unsteady economy
A slowing economy in 2022 couldn’t stop the private equity money from flowing into health care ventures. A report from Bain & Co. showed that last year was a near record year in health care, both in terms of volume and value.
Total disclosed deal value reached nearly $90 billion, down from $151 billion in 2021 but still more than $10 billion more than the next-closest year. The report shows that these trends are likely to continue to attract health care-specific funds in 2023.
"Health care 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 & Co. in a statement. "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."
In 2023, funds are tapping into new sources of capital, looking to carve-outs and public-to-private deals, and looking to sub-sectors that may perform differentially well in the current market environment.
"Change is coming as 2023 unfolds," said Nirad Jain, co-lead of Health care Private Equity at Bain & Co. in a statement "Investors who have previously weathered down cycles have specialized playbooks for these times, to which they will adapt their usual approach. This includes playing to long-term trends and getting creative to close deals amid capital and inflationary restraints."
The report identified key sectors to watch in 2023:
Regional performance: growing signs of strength and maturity in Asia-Pacific
According to the report, there is growing signs of strength and maturity in the Asia-Pacific market. Total disclosed deal value in Asia Pacific maintained 2021's record pace. Provider sector activity remained resilient, thanks in part to the burgeoning deal market in India, which accounted for four of the 10 top deals within the region. Despite slowdown of activity in China, large deals in Japan, India, South Korea, and Australia accounted for most of the Asia-Pacific deal activity. Unlike North America and Europe, Asia-Pacific was punctuated by a strong second half with six deals at a disclosed value of $1 billion or greater.
“This strong regional activity is a testament to these markets' coming of age, with geographical breadth, opportunities across sectors, and check sizes continuing to grow,” the report reads in part.
North America stayed on top of other regions in 2022 in terms of total deal count and disclosed value, according to Bain. While deal volumes fell nearly 25% from the historic levels seen in 2021, 2022 deal volumes still represent the second-best year on record. In Europe, deal counts fell to by about 20% to 92 in 2022, also making 2022 the second-best year on record for the region.