PE activity in healthcare: Focus on outpatient & inpatient services
December 07, 2015
PitchBook Dealmakers Column
Healthcare is a magnet for deal activity and investment opportunities as providers rethink their approach to delivering care. Among the more active targets for deals have been clinics and other outpatient service providers. Private equity transactions in this space hit their highest level in a decade at $2.8 billion with 111 deals last year; the pace slowed only slightly this year with 70 deals valued at $1.4 billion hitting the books through the end of Q3. Non-private equity deals targeting clinics and outpatient services have maintained an aggressive pace as well, with 80 transactions recorded through the end of Q3, and compared with 89 deals for all of 2014.
(Update: While PE transactions in the clinic/outpatient space are still lagging slightly behind 2014, there has been forward progress since the end of Q3, with an additional five deals valued at $78.4 million through the end of October. Other, non-M&A clinic/outpatient deal activity has also continued since Q3, with seven new deals valued at $63.3 million in capital invested through October 31.)
Meanwhile, deal activity in the hospital and inpatient services space has been trending upward, but excitement is much more subdued than on the outpatient side. Non-PE deals have skyrocketed since 2010, but PE interest has remained relatively low in this area.
"Outpatient services will play an increasingly large role in healthcare delivery moving forward, as payers and providers aim to deliver quality care in the lowest-cost settings as site neutrality provisions begin to take hold," said Patrick Pilch, managing director and Healthcare Advisory practice leader with The BDO Center for Healthcare Excellence & Innovation. "Reimbursements for healthcare providers are increasingly tied to patient outcomes, as well as treating patients in the right place at the right time, so collaboration among hospitals and niche providers is critical in this new environment. Partnerships, joint ventures and other collaborative business models are essential to success."
The marketplace may be ripe for the picking now, but the supply of quality targets for PE buyers and strategic acquirers isn’t limitless.
Read the full BDO report on investment opportunities, as well as PE and M&A activity, in the clinics/outpatient and hospitals/inpatient sectors: click here.
This article represents the views of the author only and does not necessarily represent the views of PitchBook.