It can be difficult in the current healthcare space to grow organically. Drug developers, for example, are faced with constant uncertainty about their various candidates in development, with the potential cost of failed drugs costing firms billions of dollars. While for now strategic acquirers may be looking to M&A as a means of growth, PE funds are also looking to cut deals. However, it can be difficult for PE investors to deploy capital in the space as strategics have the balance sheets and access to capital to outbid many PE firms.
To offset losing bidding wars, PE firms have increasingly utilized add-ons to secure their footprint in the healthcare space. Especially with valuations creeping higher over the past year, PE firms have been, and still are, partnering with smaller healthcare firms to build platforms to compete in the space. Through this approach, PE investors can put up the equity and leverage platform balance sheets to afford inflated multiples and get a seat at the table.
Which investors have been most active in sponsoring add-ons in the healthcare space? Using the PitchBook Platform, we found the firms that have made the most add-ons in the past year: