Steward Health Care, a portfolio company of Cerberus Capital Management, has agreed to acquire fellow for-profit hospital operator IASIS Healthcare, with The Wall Street Journal reporting a price tag of $1.9 billion. The current majority owner of IASIS is TPG, which has backed the business since 2004. The combined company will run 36 hospitals throughout the US.
As both a secondary buyout and an add-on in the healthcare sector, the transaction sits at the confluence of two emerging private equity trends. While overall global PE deal count declined 5.5% and deal flow in the healthcare sector stayed steady YoY during 2016, the frequency of both SBOs and add-ons involving healthcare businesses was on the rise: 3% for add-ons and a much more substantial 12% increase for SBOs, according to the PitchBook Platform.
The rates for both types of deals have been on a steady climb over the past decade. The number of completed healthcare SBOs has more than doubled since 2011, rising 108%, while add-on frequency has ticked up 37% over the same span. Let's take a closer look at both:
Global healthcare SBO frequency
Global healthcare add-on frequency
The larger trend can be traced both to a return to market normalcy in the wake of the financial crisis and a maturing crop of tech-focused healthcare companies ripe for private equity investment. The more recent explosion, though, also has another cause. With the current private equity deal cycle in its later stages, inventory for traditional buyouts simply isn’t at the levels it was in recent years; coupled with record levels of dry powder, that means PE firms are having to look elsewhere to find deals.
Interested in the other trends shaping the private equity landscape? Check out our latest US PE Breakdown.