Private equity transactions in healthcare down 15% since 2023, report finds
The number of private equity deals in healthcare has fallen since last quarter, and the year-over-year trend is heading toward a 15% decline, according to a report from PitchBook.
In Q2 2024, 185 private equity deals were closed. In Q3, that number has dropped to 148, the research firm noted. Further, the number of private equity transactions in healthcare has trended downward since 2021, after a peak in 2018, when the number of private equity-backed healthcare provider organizations was 25%.
However, the research firm said the market may be set to rebound, as there is a significant number of private equity deals pending, some of which will likely be finalized in Q1 2025.
“Last quarter, we called a turning point in PE healthcare services investing. We are standing by that call, although we are still waiting for the resulting deal announcements as processes drag on and sponsors try to time the market. Q3’s estimated deal count actually turned down moderately from Q2, with 148 deals announced or closed in the quarter,” Rebecca Springer, lead analyst for healthcare at PitchBook, wrote in the report.
In a report from May, PitchBook said private equity investments in healthcare were down 20% since 2023, potentially as a result of state and federal regulations on transactions.
However, the landscape has since changed. For example, a bill in California that would have placed healthcare-related private equity transactions under the authority of the state attorney general was vetoed by Gov. Gavin Newsom in September.
Investors switch gears
In July, PitchBook found only 4% of providers were backed by private equity groups, and in that report, Springer noted that the interests of investors had shifted.
While private equity was interested in nursing homes and long-term care facilities in the 2000s and 2010s, it now appears investors are taking more of an interest in organizations that provide specialty care services.
This aligns with a recent report from the policy watchdog Private Equity Stakeholder Project (PESP), whose analysis of investor buyouts in Philadelphia found that firms are increasingly acquiring physical therapy centers, behavioral health clinics, and dental care providers.
PitchBook’s report shows some of this trend may be national, as it found private equity firms are trending to buy mental health service providers. Health IT and pharma are also targets, as investors shy away from physician practice management and hospice services, possibly due to struggles with reimbursement, PitchBook noted.
Still, there are private equity investors with diverging interests. Examples of pending deals that could materialize in Q4 2024 or Q1 2025 include buyouts in oncology, fertility and multispecialty surgery, among others.
The full report can be found here.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.