Healthcare Private Equity in 2025: Trends, Challenges, and Opportunities with Matt Wolf of RSM 1-29-25
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What trends are shaping healthcare private equity in 2025?
Yeah, happy to, Scott. One thing that we watch closely are sort of the dollars invested into private equity-backed healthcare port codes sort of by year, by vintage, and how that relates to sort of timing expectations as we try to model out and examine potential deal flow. And sort of the conventional kind of anecdotal knowledge or wisdom that's been floating around, of course, is sponsors have been waiting for the right time to exit. They need to meet their IRR thresholds. They need rates to go down, financing to become cheaper to help facilitate that deal flow. They can hit their exit targets. And what we've seen certainly in the capital market side is 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.
How are interest rates affecting healthcare 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.
Right. And part of the core point is that regardless of the interest rate environment, there's been some softening of it, but very little. But people are really ready to put money back to work. This is what they do for a living. So they're trying to figure it out. And that's what you're starting to see. And what does that delta still look like between buyers and sellers?
What is the current state of private equity buyouts in healthcare?
Is that delta between what sellers want to sell it and buyers want? Is that starting to get lower?
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.
What investment strategies are emerging in healthcare technology?
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.
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Chapters
6 chapters
1
What trends are shaping healthcare private equity in 2025?
0:25–1:36
2
How are interest rates affecting healthcare deal flow?
1:36–3:35
3
What is the current state of private equity buyouts in healthcare?
3:35–4:08
4
What investment strategies are emerging in healthcare technology?
4:08–5:39
5
What challenges are buyers facing in the healthcare services sector?
5:39–6:14
6
How is the bid-ask spread changing in healthcare investments?
6:14–10:50
Speakers
1 identifiedMore from Becker Private Equity & Business Podcast
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