Private equity and healthcare: a winning combination for investors
Faced with changes in the sector and the growing need for innovation, private equity is emerging as a strategic lever for boosting the healthcare sector. We take a closer look at key trends and opportunities.
Private equity activity in the healthcare sector was buoyant in 2024, reaching $115 billion in investments. Europe recorded a record year with 136 transactions, while North America reached its second highest level ever. These figures illustrate the growing attraction of investors to a sector that is both resilient and innovative.
Structuring trends
Several major trends are redefining the private equity landscape in the healthcare sector:
- The aging of the population: between 2015 and 2050, the proportion of the world's population aged over 60 is set to almost double, from 12% to 22%. In France, on January 1ᵉʳ, 2021, 18.1 million people were aged 60 or over, or more than a quarter of the population. This demographic shift is increasing demand for healthcare services tailored to seniors
- The rise of women's health: an under-exploited market, where women generate between $5,000 and $15,000 billion in spending in the United States. This dynamic is increasingly attracting private equity funds, notably via platforms consolidating specialized services, such as networks of clinics dedicated to women's health or laboratories focused on gynecology and fertility research.
- Carve-outs as a lever for value creation: since 2010, carve-outs in the healthcare sector have been growing strongly, driven by companies' desire to dispose of non-strategic assets and private equity funds' appetite for such assets. These operations benefit both parties: the selling companies simplify their structure, while the funds acquire under-utilized assets with high value-creation potential under new governance.
- An optimized approach to divestments: sellers capitalize on synergies such as cross-selling or optimized go-to-market strategies to attract strategic buyers. The latter, with capital to deploy, actively seek out companies owned by private equity funds that have been operationally optimized.
A concrete impact
Private equity plays a key role in innovating and optimizing healthcare services for the benefit of patients. By investing in more efficient technologies and solutions, it reduces costs and improves access to care. For example, consolidation in the historically fragmented medical devices sector gives hospitals and practitioners access to better-quality products at lower cost. In terms of technology, EQT's acquisition of CluePoints illustrates this positive impact, with the optimization of operations through artificial intelligence having improved the reliability of clinical trials.
Why invest in healthcare today?
In an environment where innovation, consolidation and digitalization are crucial, private equity appears to be a key vector for sustainable transformation of the sector. The sector-specific expertise of funds specializing in the healthcare sector enables them to adopt a targeted approach, identifying the most relevant growth levers and thus maximizing value creation for investors.
Between 2010 and 2021, the median IRR of healthcare deals exceeded that of other industries by six points (1), demonstrating the sector's attractive return profile. With a robust track record and promising prospects, investing in specialist healthcare funds represents a diversification opportunity for investors seeking attractive returns and tangible impact.
(1) 27% vs. 21% according to DealEdge
By Emilie Buttiaux, Managing Director, Archinvest
