Healthcare Private Equity Carveouts: Trends and Insights with Amber Walsh of McGuireWoods LLP 3-7-25
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What are healthcare private equity carve-outs?
Yeah, absolutely. And really focused particularly today on healthcare private equity carve-outs as a particular deal type and M&A strategy. And What a carve-out is is not your traditional sponsor-to-sponsor transaction where one sponsor sells out its equity to another sponsor. We're not talking about deals where it's first institutional capital, where you have a founder selling to a private equity sponsor, or it's a stress deal. What we're talking about and what I'm really interested in today is healthcare private equity carve-outs typically, most commonly from a very, very, very large cap mega healthcare company divesting one of its divisions or one of its assets to a private equity fund. And we really saw an uptick in that again in 2024, as everyone's kind of reporting and crunching the data from last year. And that's really been a steady uptick from 2010 in that particular area.
type of deal, which I'm really interested in today. Thank you. And when we see these carve outs, we're seeing so much in the private equity world of people having a harder time exiting the sponsor deals. Like I just came across my desk, a sponsor deal where they're selling the deal, but they're selling it to another company controlled by the sponsor and more and more of that different ways to exit. When you look at the corporate carve outs, what are you seeing there? What what's going on? What's driving a lot of that activity?
How do corporate carve-outs drive market activity?
Yeah, that's absolutely right. All sorts of different kinds of deal structures. But on the carve-out, why it's so attractive is that we've talked so much in the past 18 months or so about the challenges of getting more traditional buyout deals done, particularly requiring debt. and the level of diligence involved and some instability in the regulatory market, but yet you also had these fully funded funds with dry powder that needs to deploy capital. And so even though everyone is expecting and already seeing that loosening up and getting more active back again in 2025, what the carve-out market did was allow private equity buyers to acquire and reinvigorate assets that were considered a little more stable, often cash flow positive. They are not necessarily troublesome assets for the divesting company. it just happens that the divesting company no longer really considered that particular division or asset part of its strategic plan and vision.
What types of assets are typically involved in carve-outs?
And so what you see is these mega companies streamlining, choosing to divest what they consider non-core assets, but they're really attractive assets for private equity buyers that are really stable and are going to perform well in diligence. And it just, opened up a and this has been going on for you know as long as there's been private equity but again last year saw an uptick including in health care thank you and i think that's that's part of the point is that these are often good assets they're just caught in a corporation or company where it's not the primary goal of that corporation or company is that a fair statement
How are mega healthcare companies managing assets?
Yeah, that's absolutely right. I mean, of course, every deal has its own features, but that is quite often what it is. It's just the investor makes a choice and there's a whole market and these private equity funds where they've got to answer to their LPs, they need to deploy their capital, they can be very attractive. And there's a real potential for high returns, although there's some challenges to those as well, because depending on really how embedded that particular division or asset is to the rest of the company from which it is being divested, it requires the buyer to diligence in a whole new way sometimes. Sometimes it's hard to diligence when it's so core to another business line. And it also can be hard to operationalize
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Chapters
6 chapters
1
What are healthcare private equity carve-outs?
0:28–2:09
2
Why are carve-outs an attractive deal type?
2:09
3
What trends are emerging in private equity exits?
1:45–2:04
4
How do corporate carve-outs drive market activity?
2:04–3:29
5
What types of assets are typically involved in carve-outs?
3:29–4:10
6
How are mega healthcare companies managing assets?
4:10–8:08
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