20150401-Bain___Company-GLOBAL_HEALTHCARE_PRIVATE_EQUITY_REPORT_2015_in_collaboration_with_the_Healthcare_Private_Equity_Association_40页_5mb

Global Healthcare Private Equity Report 2015 Summary

Core Content

This report provides an in-depth analysis of the global healthcare private equity (PE) market in 2014, highlighting key trends, geographic activity, sector performance, strategic initiatives, and exit opportunities. It is a collaborative effort between Bain & Company and the Healthcare Private Equity Association (HCPEA), with the goal of supporting the healthcare PE community through insights and analysis.

Main Points

• Market Overview:
  The 2014 healthcare PE market saw a record $29.6 billion in new buyout investments, a nearly 100% increase from 2013. However, the number of deals decreased by 10%, and large-scale assets over $1 billion remained scarce.

  • Deal value hit a three-year high, but deal count was lower.
  • The largest deals were concentrated in Europe and North America, with some notable activity in Brazil and China.
  • Strong public equity markets and strategic buyer interest supported high valuations, though this also limited access for some investors.

• Exit Activity:
  The exit environment remained robust, with the number of exits matching 2013's record levels.

  • Strong exits were observed for assets from the 2006-2007 boom period.
  • High valuations and limited large-scale assets contributed to an exit overhang for some deals.

• Investor Behavior:

  • Investors continued to favor "healthcare heavy" and "healthcare light" segments, focusing on product and services assets.
  • Some funds pursued "gem" assets with strong market positions, though these came at a premium.
  • Buy-and-build strategies remained popular, with firms expanding their platform assets or acquiring new ones.
  • With mega-deals in short supply, many funds turned to midsize and early-stage investments.

• Strategic Activity:

  • Category leadership played a key role in deal value and success.
  • Turnaround capabilities were tested through carve-outs and strategic acquisitions.
  • There was a focus on value creation through ongoing operational improvements and cost reduction.

Geographic Trends

North America

• Deal Value: $15.6 billion across 80 deals, up from $9.8 billion in 2013.
• Key Deals: Two mega-deals, including the $4.4 billion acquisition of MultiPlan and the $4 billion purchase of Ortho-Clinical Diagnostics.
• Sectors: Payers and services were active, especially in network building and cost containment. Provider and related services saw significant interest in multisite assets.
• Biopharma and Medtech: Activity was driven by early-stage investments and CXO deals.
• Exit Environment: Healthcare IPOs accounted for almost 40% of all debuts in the US.
• Macro Trends: Affordable Care Act reforms spurred investment in new care and payment models, including HCIT and population health management.

Europe

• Deal Value: $9.6 billion across 58 deals, up from $3.2 billion in 2013.
• Key Deals: Six deals exceeding $500 million contributed to the increase in value.
• Sectors: Provider and related services remained the most active, with interest in branded biopharma assets.
• Regulatory Environment: Ongoing healthcare reforms and cost containment efforts shaped the market.
• Challenges: Implementation of reforms was complex, and underwriting challenges limited deal activity.
• Currency Risk: A weak euro posed risks for international companies with euro-denominated revenues.

Asia-Pacific

• Deal Value: Mixed, with China being a bright spot due to favorable regulations, while India saw tempered activity due to macroeconomic uncertainties.
• Key Deals: Favorable regulations in China spurred activity in provider and medtech segments.
• Emerging Markets: Brazil saw a major deal with Bain Capital's acquisition of Intermedica Sistema de Saude for $860 million.

Sector Trends

• Medtech and Related Services:

  • This sector was the clear leader, with deal values nearly five times higher than 2013.
  • Large corporate carve-outs contributed to the surge in deal value.
  • High activity in developed markets and China, particularly in diagnostics.

• Biopharma and Related Services:

  • Activity declined in value and number compared to 2013.
  • Notable subsectors included contract outsource organizations (CXO), OTC manufacturers, and generics producers.

• Providers and Related Services:

  • Multisite provider assets and emerging market opportunities were popular.
  • Notable deals included the acquisition of Healogics and National Veterinary Associates.

• HCIT (Healthcare Information Technology):

  • Continued focus on new care and payment models, driven by healthcare reforms.
  • Investments in HCIT solutions helped support value-based care and population health management.

Strategic Activity

• Category Leadership:

  • Funds that demonstrated strong category leadership saw higher deal values and success.
  • Strategic acquisitions and build-out strategies were common.

• Carve-Out Opportunities:

  • Strategic buyers were divesting noncore assets, creating opportunities for PE.
  • PE firms were able to acquire these assets and deploy turnaround capabilities.

• Down-Market Investments:

  • Due to the scarcity of large-scale assets, many funds turned to early-stage and middle-market investments.

Key Takeaways

• Market Dynamics: High valuations and limited large-scale assets created a crowded market.
• Geographic Activity: Europe and North America led in deal value, while Asia-Pacific showed mixed results.
• Sector Focus: Medtech and provider services were the most active, with biopharma and HCIT also showing growth.
• Investor Strategies: Buy-and-build, early-stage investments, and carve-outs were common approaches.
• Exit Prospects: Strong exit environment, with continued interest in IPOs and strategic sales.

Conclusion

The 2014 healthcare PE market was marked by strong deal values, limited large-scale assets, and a shift toward midsize and early-stage investments. Despite challenges, the sector remained attractive due to its potential for value creation and the ongoing reforms in healthcare delivery and payment models. The report provides valuable insights for investors looking to navigate the evolving landscape of healthcare private equity in 2015 and beyond.