A s some packed the skis and headed to their favorite slopes this winter season, it is hard not to see the analogies to the healthcare private equity (PE) transaction market as we ring in the New Year. Much like the Northern Rockies, there should be plenty of dry powder to support a robust deal- making environment in 2025. That, combined with other macro factors we delve into below, could make 2025 a year to remember – and the conditions are looking good ! 1. Powder Alert! Macro Factors Affecting Healthcare PE Opportunities in 2025 BY RYAN THOMAS & ANGELA HUMPHREYS Before we look ahead to 2025, however, let’s look at what was holding us back in the deal markets in 2024. Most of those in the healthcare PE deal world were active in 2024, but deals were not closing at the normal pace, if at all. Although there were some successes and notable transactions, 2024 may go down as the “year of the broken deal.” Moreover, auctions were not, in general, as robust as in prior years – with many processes ending up with one “real” (or even no) bidders – and bankers trying to hold on to deals to keep the optics of competition alive. Why? The deliberate, methodical pacing of many buyers in 2024 inevitably resulted in sales processes taking longer. Perhaps there was also a lack of conviction by buyers in 2024, with sponsors going through the motions to show activity to their limited partners (LPs) (all eager for the return of capital), but not really excited with the assets being showcased by the bankers. Additionally, there was still uncertainty in the financing markets – especially earlier in the year – as well as a continued price expectation gap between buyers and sellers. These factors, combined with heightened scrutiny of transactions from federal and state antitrust and healthcare regulators destabilized the deal market last year. So why the optimism for 2025 ? First and foremost, the dry powder held by PE firms continues to pile up, and LPs need to see a return of capital in order to continue their capital allocations to the space. Sponsors face increasing pressure to generate activity on both the sell side and the buy side – and these mutual interests should help bridge pricing expectation gaps, allowing the markets to adjust to the new normal. Interest rates should continue to trend down, and private debt capital funds are open for business. Strategic buyers need inorganic M&A strategies to maximize growth. In addition, the Trump administration should most likely trend pro-business, and this shift hopefully will trickle down to the state level, where regulators have piggy-backed on the federal narrative in scrutinizing PE’s involvement in healthcare. Ultimately, for the best healthcare assets, we should see very robust activity –and this should open the doors for even more deal activity across the industry in both the lower and middle markets. The increased deal activity and opportunities will ideally force deals back to a more normal cadence and pacing. It is not a question of “if” anymore – just when. Nobody knows for sure, but the “when” will be sometime in 2025. So, in the meantime, we are waxing our skis, adjusting our boots, and getting ready for a blizzard! 2. Carving a Path for Infusion BY SHANNON WILEY The infusion industry is currently fueled by multiple tailwinds driving interest and investment. The disproportionately high number of infusion specialty drugs in the Food and Drug Administration (FDA) approval pipeline and an aging population with polychronic needs promises to support enthusiasm in the sector. Coupled with pressure from payors to move patients out of hospital-based infusion centers and consumer demand for convenience and an experience that feels less clinical, infusion providers are carving their own path and are well poised for growth.
1 HEALTHCARE PRIVATE EQUITY: 2025 OUTLOOK & TRENDS IN M&A |
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