After increasing for three consecutive years, PE deal-making in the health care industry reversed course in 2013, with deal flow dropping by 12 percent and capital invested falling 23 percent. Deal-making swung widely from quarter to quarter, hitting one of its lowest levels in the last four years in Q2, only to spike 75 percent the following quarter. “There is still a lot of uncertainty in health care regulation, such as changes in Medicaid reimbursement rates and the states’ ability to fund increased volumes expected as a result of the ACA,” says Andy Jenkins, director of transaction advisory services at McGladrey. “We think the beginning of 2014 will be slow, but once the smoke begins to clear, we expect to see more active investors and anticipate a strong 2014.”
While overall PE deal-making in 2013 declined for the first time in five years, IT bucked the wider trend, as deal flow was essentially flat and capital invested surged to $86.5 billion thanks to the buyout of Dell in Q4. Even without the Dell deal, capital invested was particularly strong in the second half of the year. “If you look at the quarterly trends, you can see improvement throughout the year, and I think that will continue in 2014,” says David Van Wert, director of transaction advisory services at McGladrey. “I think 2014 will be a better year than 2013 in terms of deal count and the median deal size will be a little higher, as well.”
More insight and in-depth information on PE investing in the health care and IT industries in 2013 can be found in the Private Equity Deal Flow Profiles published by McGladrey. Powered by PitchBook, the reports include current industry trends, deal activity and exit activity, as well as insight from McGladrey professionals.
To learn more or download the reports, click here.