For years, healthcare has been a major area of focus for private-equity investment, driving strong trends of consolidation within the industry. But a recent market analysis report from Pitchbook shows that momentum in healthcare specialist funds may be slowing down.
Healthcare specialist funds from 2015 to 2017 and 2018 to 2020 performed almost the same as other PE firms across the same years, according to the report. But these firms have not returned to the peak returns seen by other PE firms from 2012 to 2014, according to the report.
Exit activity can be another measure of health PE fund performance, as quick exits can indicate higher potential return on investments. But, according to the report, exit activity in the industry has slowed. The activity that healthcare PE funds saw between 2012 and 2015 has fallen in more recent years, lagging behind other PE asset sales.
Competition among these firms and valuations rose alongside stalled exit activity. This, in conjunction with the labor shortages and regulatory challenges in healthcare over the last several years, could be slowing down PE activity, particularly in healthcare IT and healthcare services.
In addition to slowing exit activity, PE firms also recorded notably fewer acquisitions in 2023 compared with earlier years. Last year there were 788 recorded healthcare PE deals, down from 940 in 2022 and 1,114 in 2021.
For ASCs, six private equity deals were done in 2023, compared to eight in 2022, the report said. However, given that these trends have mostly developed over the last five years, experts noted that it will take time to understand how this data will affect healthcare PE activity in the long run.