Matt Wolf
speaker
221 appearances
14 recordings
2 series
first heard Jan 2025
last heard Jun 2025
Matt Wolf’s voice in public audio — every appearance, attributed to the second.
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Appearances
Even as the Fed started to lower the front end of the curve, we've seen interest rates on the longer end that sort of better informs the private credit that finances a lot of these deals. Those yields have actually increased. And so it's another way of saying that the interest rate environment is unlikely to get better. much better or much more supportive of deal flow.
And we've already seen some sponsors sort of rip the bandaid off, for lack of a better term, and exit a lot of these positions as they allocate capital towards new funds, new investments, allocate their operating partner, their deal team talent to new investments and new businesses. And we're going to see a lot more of that, I think, in
In 2025, I was just based off of PE buyout investments in healthcare, sort of healthcare broadly defined, excluding life sciences. We have right now about 2,200 companies that are outside of the typical five-year hold. For private equity, we have another almost 900 companies that, you know, saw their last sort of private equity buyout over seven years ago.
And again, this is just sort of healthcare broadly defined, excluding life sciences. And those, you know, the dollar value, at least of their last sort of buyout investment for the port co's outside of seven years, was over $42 billion, according to PitchBook data. That's primarily what I look at for this type of analysis.
And, you know, that's a lot of money, $115 billion outside of the five-year hold, again, for this sort of semi-broad definition of healthcare. And, you know, I think sponsors are, they realize, like, the interest rate environment is not going to become more accommodative to dealmaking. And we're going to see a lot of this change hands in 2025.
It is, I'd say broadly across health care. The real question, what we're continuing to watch is what is that bid ask spread for health care services, for providers, for businesses that accept reimbursement risk? Because I can tell you. Based on conversations I've had with a lot of sponsors in the space, there are many who are committed to investing in health care.
They no longer want to invest in companies that take direct reimbursement risk. They don't want physician practices. They don't want hospitals. They don't want senior care. They want to put their money to work into health technology that will help support those businesses or suppliers that will help support those businesses or other sort of kind of a pick and shovel sort of play.
They're committed to health care, but they're leaving the services business. They don't want that reimbursement risk. And so as the as the potential buyers leave, of these healthcare providers that need to flip to a new PE as that pool of buyers sort of shrinks.
I think we might continue to see this bid ask spread delta, at least in healthcare services that will sort of maintain even if it shrinks in other areas of healthcare.
Yeah, absolutely. And I think we've talked about it on this podcast before, but it's really interesting. It kind of swings like a pendulum. You know, 10, 15 years ago, most sponsors stayed far away from reimbursement risk due to all of the operational regulatory challenges that you alluded to.
But then over the prior economic cycle, as interest rates were very low and money was easy to come by, there were a lot of sponsors who started to kind of dip their toes or even get even more serious about the space. And they were able to make a lot of money doing so.
now that we're in this new regime of higher interest rates, positive real interest rates, we're seeing the tide sort of recede again, as some of those sponsors say, you know what, this just is not a focus of ours anymore, and so we're leaving.
And that, I think, will continue to vex sellers, but I do think it's an opportunity for buyers who remain committed to accepting that reimbursement risk, right? The competition for these deals is, is declining in many spaces.
And so if your shop is good at diligence, good at the operations around these practice management or other businesses that accept reimbursement risk, I think there'll be a lot of hay to be made in 2025. I think that it actually benefits some of those shops. So we'll see how it all plays out. But
And certainly the uncertainty and challenges of the regulatory environment and reimbursement risk, those are only going to grow over time. It's not going to become a simpler business. It's only going to get more complex. But I do think that creates opportunities for the sponsors that are going to focus on the area.
Yeah, busy. It is very busy. we're getting a lot more requests for sort of more limited diligence at earlier stages of the process. And I think this is coming from sponsors want to
spend they're going to spend more time and more money looking at deals to make sure that they're making the right deals you know i think a lot of the the sponsors we talk about they're expecting to look at more deals in 2025 but probably close about as many as they did last year hopefully more but they're not um you know they're very much internalizing the mantra of you know it's always a good deal to walk away from a bad one and they're they're very concerned about um
allocating capital in the wrong way, which makes sense, right? As interest rates increase, the opportunity cost of making your investments increase, and we're gonna see a lot more diligence around these deals before they close or if they close.
Yeah, yeah, absolutely. I mean, we'll see – you know, oftentimes if after the limited diligence, limited look, and I use the term diligence broadly, right? It could be partially financial. It could be a partially a sort of a chart review type diligence or IT diligence or some of all of that, but a lighter touch on very specific areas of concern. And then as the process progresses,
expands or as the process continues, if the sponsor is still interested, then we'll go to more of a full sort of financial tax, other diligence that you would expect to see So overall, a longer process, more diligence, but starting earlier with the lighter touch.
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