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Corporate buyouts in health care trend higher

Sarah Pringle
Apr 20, 2022
Data: PitchBook; Chart: Thomas Oide/Axios

In contrast to the preceding three years, when PE shops exited investments in Q1, corporate buyers paid higher prices than private equity sponsors, as public listings effectively vanished, per PitchBook data shared with Axios.

By the numbers: In 2021, the median deal size for sponsor acquisition and corporate acquisition of a PE-owned health care company landed at $875 million and $191 million, respectively.

  • In Q1 2022, corporates median buy was $450 million, versus sponsors' $349.2 million.
  • All this while the median public listing exit size went from about $1.8 billion last year to... nada.

Between the lines: The divergence may be inconsequential given deal activity slipped significantly in Q1, but the data may reflect the fact that private equity buyers are behaving in a more disciplined manner.

  • That's not all that surprising as investors soak in recent public market volatility and fading digital health valuation euphoria.
  • It also perhaps supports the narrative that more large buyout firms are going downmarket to participate in growth rounds.
  • Plus, geopolitical and inflationary concerns along with rising interest rates make it a tough time to be a lender right now, and "that makes you lean strategic" in some cases, one banker said recently. (Although the private-credit market is booming.)

Zoom out: Overall, the median valuation for a private equity health care exit fell from $565.5 million in 2022 to $450 million through the end of March.

  • When you compare the quarter with a longer stretch of time, it doesn't look so bad. For example, 2012's median landed at $150 million, PitchBook data shows.

The big picture: Q1 was choppy from a deal count and valuation perspective, but a lot can change in the coming months.

  • "The January-February volatility has actually been healthy, as people think about what's really durable as opposed to the digital health COVID phenomenon. People needed a little time to rebase themselves," one PE investor said on a recent conference panel.
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