Healthcare private equity deals scored second-biggest year, finds new report from Bain & Company

A new report finds PE healthcare deals reached record levels in 2022.

Good morning, Hubsters. MK Flynn here with the Wire.

In New York, we’ve got a beautiful Spring day today, with the magnolia trees and forsythia bushes in full bloom.

There may be some clouds in the financial forecast, as corporate earnings season kicks off this week.

“Analysts expect companies in the S&P 500 to report a second consecutive decline in quarterly earnings,” reports the Wall Street Journal. “First-quarter profits are projected to drop 6.8% from the same period a year earlier, according to FactSet. That would mark the steepest earnings decline since the second quarter of 2020, when the onset of the Covid-19 pandemic resulted in a 32% profit contraction.”

As concerns continue in the wake of Silicon Valley Bank’s failure, investors will be following closely as quarterly results come in this week from some of the country’s biggest banks, including JPMorgan Chase, Citigroup and Wells Fargo.

At PE Hub, we’ll be looking and listening to see what bank executives say about lending, and how loans for PE-backed deals may be affected.

Switching gears… A new report on healthcare dealmaking just came out this morning.

Let’s take a close look at it.

Recession-proof reputation
Healthcare dealmaking hit near-record levels in volume and value in 2022, according to a report out this morning from Bain & Company.

Total disclosed deal value reached nearly $90 billion, down from $151 billion in 2021 but still more than $10 billion more than the next-closest year, found Bain’s 12th annual Global Healthcare Private Equity and M&A.

“Healthcare private equity has earned a recession-proof reputation, typically outperforming overall private equity activity during economic downturns,” said Kara Murphy, co-lead of healthcare private equity at Bain. “While the space is resilient, investors will face continued challenges ahead as interest rates and labor costs continue to climb, and credit continues to be tight.”

Here are sectors to watch in 2023, according to the report:

Biopharma and life sciences remain attractive. Six of the top 10 deals last year were in biopharma, life science tools, and related services. Within these subsectors, more than 600 healthcare buyout deals have been executed over the past five years globally. In 2023, the bar is high to win the right deals as competition for these assets holds strong and valuations have run up, even within the current macro context. Investors here need to clearly define their strategy, crystalizing where a fund will choose to play and what gives that fund a right to win in the face of a potential downturn and beyond.

Opportunities to expand around value-based care. Sustained macro trends continue to drive value-based care adoption across a spectrum of care models. While investment activity remains focused on primary care and Medicare Advantage, opportunities across other payer and specialty segments are expanding. Enabler models represent an attractive investment path, with adoption driven by a need for traditionally fee-for-service groups to participate in risk-based arrangements. Providers and value-based care enablers that can bend the cost curve with differentiated care models and advanced analytics are positioned to succeed.

This is likely to accelerate as regulation increases, data from early adopters is seen, and more capability-enhancing technology floods the market. Bain’s analysis suggests fee-for-value arrangements will capture 15%–20% market share from traditional FFS providers in primary care by 2030, supporting further investment in the space.

Adapting to AI breakthroughs. 2022 was a monumental year for generative artificial intelligence (AI), with new services emerging in imaging and text generation. AI is already accelerating therapeutic discovery, optimizing supply chains, and automating payer and provider back offices. Use cases for generative AI are just emerging. Stakeholders are watching closely and are ready to adapt when the time is right.

Healthcare IT continues to grow. Despite healthcare historically underspending on technology, in 2022, healthcare IT (HCIT) buyout volume added up to be the second highest on record. With provider IT continuing to be the main driver, biopharma IT and payer IT are catching up. Within biopharma IT, we see interest in businesses that use technology to support workflow productivity and reduce clinical trial length. Payer IT deals reflect continued interest in technology focused on payer administrative functions.
Looking ahead to 2023, funds are tapping into new sources of capital, looking to carve-outs and public-to-private deals, and looking to sub-sectors that may perform differentially well in the current market environment, the report said.

“Change is coming as 2023 unfolds,” said Nirad Jain, who co-leads healthcare private equity at the firm with Murphy. “Investors who have previously weathered down cycles have specialized playbooks for these times, to which they will adapt their usual approach. This includes playing to long-term trends and getting creative to close deals amid capital and inflationary restraints.”

Another sector we’ll be keeping a close watch on this week and throughout earnings season is tech. Volatility in tech stocks has created opportunities for PE firms. For example, in March, Vista Equity Partners completed its take-private buyout of Boston-based insurance software developer Duck Creek, for about $2.6 billion.

PE Hub is tracking activity in the sector closely, especially the enterprise software subsector.

Obey Martin Manayiti is working on a feature about what’s driving enterprise software deals, including the financing of PE transactions.

If you have insights to share, reach out to us at and

On that note, I’ll sign off for today, but I’ll be back with more tomorrow.

Until then, happy dealmaking,