Despite a 14% decline in overall private equity deal value, investments into the health care industry reached a 10-year high in 2016, with health care private equity deals reaching $36.4 billion, almost a 60% increase from 2015. The MultiPlan (a national-managed health care preferred provider organization) and TeamHealth (an American hospital staffing firm) deals accounted for almost 33% of total investments, with deal values of $7.5 billion and $6.1 billion, respectively. The majority of investments were focused on public-to-private deals, with three out of the four largest deals in 2016 being public-to-private, as well as outsourced contract services, IT and retail-based clinics.  By sector, provider and related services deals totaled $14.9 billion, payer and related services deals reached $10.5 billion, deals for biopharma and related services were $8.1 billion, medtech and related services deals totaled $2.8 billion, and health care IT activity topped $15.5 billion.

North America was a hotspot for private equity activity in 2016, with nine of the top ten deals involving US companies. In total, North American deal value jumped to $28.4 billion in 2016, over three times what it was in 2015, even though the number of deals decreased 13% to 101. Along with the MultiPlan and TeamHealth deals, five other deals were valued at $1 billion or more, which largely drove the increase in deal value. In Europe, deal value fell drastically to $4.6 billion in 2016, a 42% decrease. The number of deals also decreased 12.2% to 49.

In contrast, Asia Pacific private equity deals in health care were healthy in 2016, with total deal value of $3.2 billion. Although this is a 35.0% decrease from 2015, this is largely due to the fact that there was no significant “megadeal” in 2016 like there was the year before (i.e., the $3.3 billion buyout of WuXi PharmaTech). Ten deals in Asia Pacific were valued at over $100 million, and $700 million was utilized for private investments in public equities. The majority of Asia Pacific deals were made in the health care provider sector, with 113 deals made in 2016, a 21.5% increase.

The International Monetary Fund (IMF) predicts that global expenditures in health care will increase 6% each year to $10 trillion in 2020. The US is the largest health care market in the world, with spending comprising 18% of GDP and IMF predicts the US market itself will be over $4 trillion in 2020.

Source: Bain & Company