Global healthcare private equity soars to $115 billion in 2024, second-highest deal value on record: Report

Global healthcare private equity deal value is projected to surge to $115 billion in 2024, marking the second-highest record ever. The surge in deal value is primarily attributed to an increase in large-scale transactions, with five deals exceeding $5 billion, compared to only two and one in 2023 and 2022, respectively. This increase in large deals reflects a growing confidence in the healthcare sector's long-term growth potential.

Bain & Company's latest report highlights the resurgence in deal activity within the sector, emphasizing the critical roles of biopharma and healthcare IT in this recovery. The report provides a detailed analysis of the current state and future trends of the global healthcare private equity market, offering insights into the key drivers behind the recent surge in activity.

The report indicates that North America remains the largest market, accounting for 65% of global deal value. Europe and Asia-Pacific contributed 22% and 12%, respectively. Healthcare private equity activity in Europe reached a historic high, surpassing the peak volume in 2021, driven by smaller deals in the first half of the year and a focus on scalable assets in biopharma and medtech. The stability of the macroeconomic environment has also fostered optimism for continued growth in the region.

Concurrently, deal volume in Asia-Pacific declined by 49% compared to 2023, primarily due to the slowdown in China's economic growth. However, investment is shifting towards other regional powerhouses such as India, Japan, and South Korea, where economic growth and demographic shifts are driving healthcare demand. The biopharma sector has emerged as the frontrunner in healthcare private equity deal value, boosted by several large transactions in 2024.

Furthermore, healthcare IT, as another strong-performing area, has also experienced a significant rebound in deal activity. This is mainly due to healthcare providers seeking to improve efficiency under financial pressure, payers investing in advanced analytics technologies, and biopharma companies upgrading clinical trial IT infrastructure to meet stricter funding and regulatory requirements. Gregory Garnier, head of Middle East private equity at Bain & Company, noted that the scalability of the biopharma industry and its alignment with national health agendas make it a focal point for Middle Eastern sovereign wealth funds.

Hatim Jamal, chief financial officer at Bupa Arabia for Cooperative Insurance, stated: "In Saudi Arabia, we anticipate a continuous increase in demand for private healthcare services due to population growth and the evolution of the health insurance sector. Moreover, ongoing efforts to achieve the 2030 Vision goals, such as improving healthcare infrastructure and modernizing hospitals and medical centers, will play a crucial role."

The report identifies five key trends shaping the future of healthcare private equity, including the outperformance of healthcare-focused mid-market funds, which have raised $59 billion since 2022, a 40% increase compared to the previous three years. These funds have diversified their investment directions, focusing on healthcare IT and healthcare service providers alongside biopharma and medtech.

The trend of asset carve-outs has also been accelerating since 2010, with private equity firms leveraging corporate divestitures to enhance shareholder value. This trend presents compelling opportunities to acquire overlooked assets with significant value creation potential. Additionally, exit deal volume has decreased by 41% from its peak in 2021, reflecting challenges such as extended holding periods and high interest rates. Private equity firms are increasingly incorporating value creation strategies into their due diligence to maximize returns in a challenging exit environment.

Finally, investment focus in the Asia-Pacific region has shifted beyond China, with India emerging as a preferred destination due to its growing middle class and healthcare needs. Furthermore, Japan and South Korea are also gaining attention due to their aging populations and favorable macroeconomic trends. Experts predict continued growth in healthcare private equity, driven by sustained investor interest in scalable assets and opportunities in biopharma, healthcare IT, and asset carve-outs.

Kara Murphy, co-head of healthcare private equity at Bain & Company, said: "The healthcare private equity market has rebounded strongly in 2024, and we anticipate robust activity in the coming year, particularly in mid-market funds and the European market." As the industry continues to evolve, the ability to identify high-value opportunities and strategically manage assets will be critical to sustaining the growth momentum of the healthcare private equity sector.