Summary
Healthcare PE Deal Making Trends and Outlook for 2023
In this episode of the podcast, Scott Becker interviews two directors from VMG Health’s Valuation & Transaction Advisory Division, John Meindl and Taryn Nasr. The three leaders discuss the recent trends in healthcare private equity deal making and provide insight into the outlook for deal making in 2023. This episode is sponsored by VMG Health.
Increasing Trend of Tuck-In Acquisitions
Meindl and Nasr point out that there has been an increase in tuck-in acquisitions due to easier financing and a decrease in platform deals. However, there has been an increase in dollars flowing to those deals. They also note the trend of multiple arbitrage as private equity groups buy low and sell high, as well as secondary buyouts within physician practice management groups.
Creative Financing Solutions Needed
Private equity firms are having to come up with more creative solutions to financing due to banks not being willing to lend as much. For 2022, the amount of cap table hovered around six times EBITDA for debt and about the same amount coming from equity. Healthcare is considered a recession-resistant industry and private equity’s allocation to healthcare has been about 15-16% of funds. Sub-industries such as ophthalmology, orthopedic practices, dental practices, urgent care, oncology, and behavioral health have seen increased interest from private equity firms.
Popularization of Private Equity Investments
Private equity investments have become more popular than strategic transactions in recent years. For people looking to do business with private equity funds, it is important to do a quality of earnings analysis on your own business and familiarize yourself with the market. Typical investment periods for private equity investments are usually five years.
Tighter Credit Lending Standards Require More Equity Financing
The increasing interest rates and volatility in regional banks have led to tighter credit lending standards, resulting in an increase in reliance on direct lenders and more equity financing for deals.
Overall, Meindl and Nasr predict a strong outlook for healthcare private equity deal making in 2023 and beyond.
Note: This is an AI generated transcript, not edited by a staff writer and is solely intended for educational purposes. If you have any questions/concerns, reach out to podcasts@beckershealthcare.com
This episode aired on 05/11/2023 and can be listened here.
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