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Healthcare Private Equity Buyouts Posted Record-Setting Volumes In 2020 After A Year Of Unprecedented Upheaval For Global HealthcareNEW YORK, March 16, 2021 /PRNewswire/ -- The Covid-19 pandemic rocked global healthcare systems and communities to their core in 2020. Healthcare investors realized a Covid-19 paradox, facing urgent, widespread need for innovation and more equitable access to healthcare services as well as sharp repercussions for demand. Nonetheless, healthcare private equity showed remarkable resilience last year. In contrast to the overall private equity market, healthcare private equity deal volume rose to record levels, increasing by 21% to a total of 380 deals in 2020. Ample dry powder, along with capital markets' strong appetite for exits, created fertile conditions for investment. These are the findings from Bain & Company's tenth Global Healthcare Private Equity and M&A Report, released today. Despite Covid-19's damage to patient volumes and provider margins, healthcare provider and biopharma sectors were the most active in 2020, with nearly 150 deals each. Pressures on healthcare providers and the shift toward alternative sites of care also drove growth and activity in healthcare IT. 2020's uptick in deal volume, however, came with reduced total and average deal values, especially in the absence of blockbuster transactions on the order of the 2019 $10.1 billion Nestlé Skin Health deal. The average size of deals with disclosed values dropped 57% in 2020 while total disclosed deal value declined for the first time since 2015, falling 17% to $66 billion. "The concentrated impacts of the Covid-19 pandemic on the healthcare industry made last year's economic shock unlike anything the sector has felt in recent years," said Kara Murphy, who co-leads Bain & Company's Healthcare Private Equity practice. "While previous recessions saw healthcare deals become a beacon of quality and stability, the picture in 2020 was more nuanced. We saw a rise in activity around Covid-19 treatment and prevention juxtaposed with a litany of disruptions, including volume losses, treatment deferrals and supply chain constraints." The industry's upheaval in 2020 inserted substantial uncertainty for buyers and sellers of assets, reducing deal appetite, especially for the largest deals that have been a hallmark of prior years. For example, between 2015 and 2018 the top 10 healthcare buyouts represented roughly 60% to 75% of disclosed value for all healthcare deals. In 2020, however, the top 10 deals represented just 43% of total value, the largest being DXC Technology at $5 billion. Among deals with disclosed values, the average size of a check fell to $296 million in 2020 from $686 million the year earlier as large volumes of lower-value deals jumped in 2020, especially in the Asia-Pacific region. Covid-19 was not the only relevant factor dampening disclosed value. A number of large assets traded without disclosing value. Also, some of the largest assets wound up transacting to special purpose acquisition companies (SPACs). At the same time, even amid a turbulent macro environment, many investors were able to secure rapid financing, allowing them to shore up tightened balance sheets of their existing investments, as well as move quickly on investing in new assets. In the US and Europe, debt-to-EBITDA multiples remained high, a sign of good access to credit for investors. "Healthcare private equity saw robust activity in 2020, and we believe competition will continue to intensify for attractive assets that come to market in high-interest segments," said Nirad Jain, co-head of Bain & Company's global Healthcare Private Equity and Corporate M&A practices. "Investors will need to diversify their search and forge strong relationships across the industry in order to position themselves to access high-value, accretive opportunities." Asia-Pacific's surge Declines in North America and Europe SPACs in vogue As a proven investment sector, healthcare attracted its share of newly formed SPACs and a few fast-moving groups were able to complete deals last year. Notable examples include Multiplan, a healthcare services and technology solutions provider, which merged with Churchill Capital III in a deal valued at $9.7 billion; Cano Health, a value-based care provider for seniors, which merged with Jaws Acquisition Corporation in a deal valued at $3 billion; and Cerevel Therapeutics, a biotech firm spun out of Pfizer's neuroscience division, which merged with Arya Sciences Acquisition Corporation II. Private equity investors increasingly view the SPAC as an attractive exit channel, and the next year or two will serve as a "make or break" time for SPACs, which typically are allowed two years to deploy their capital. M&A contractions Seizing the moment: opportunities to watch in 2021
Looking ahead to 2025 Legislative and regulatory risks could certainly cloud the picture, especially in the wake of the pandemic and the significant changes that will likely result in health systems, infrastructure, and historic pricing tailwinds. Nevertheless, Bain does not anticipate a comprehensive overhaul of most countries' current healthcare systems. Instead, it expects to see a mix of continued pricing growth, increased demand, and the creation of new market niches to explore. Editor's Note: For more information or to arrange an interview, please contact Katie Ware at [email protected] or +1 646 562 8107. About Bain & Company Across 59 offices in 37 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition and redefine industries. We complement our tailored, integrated expertise with a vibrant ecosystem of digital innovators to deliver better, faster and more enduring outcomes. Our 10-year commitment to invest more than $1 billion in pro bono services brings our talent, expertise and insight to organizations tackling today's urgent challenges in education, racial equity, social justice, economic development and the environment. Since our founding in 1973, we have measured our success by the success of our clients, and we proudly maintain the highest level of client advocacy in the industry. Media Contact:
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