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Healthcare Technology Investors Predict Pickup in Deal Activity in Next 2 Years
Healthcare technology investors at McDermott Will & Schulte’s Healthcare Private Equity Conference held in Miami Beach last week are predicting a rise in deal activity in the next 12 to 24 months.
“It’s not going to be, in my view, back to the 2021 frenzy, but I do think there’s going to be … a major pickup in activity,” an investor said.
Interest rates have come down, and although valuations for some healthcare technology businesses have stayed lofty, valuations for others have “normalized,” the investor said, adding that there are many long-held private equity portfolio companies that need to transact.
“We certainly are approaching the next 12 to 24 months with optimism,” the investor said. “I think there’s going to be a lot of activity.”
Exit activity in the sector in the next 12 to 24 months is going to be better than that of the past two years, said a second healthcare technology investor at the conference.
The investor predicted that there would be less of a gap between buyers and sellers’ price expectations. “I am hopeful that over the next 12 to 24 months, we’ll see a lot more activity,” the investor added.
Recent healthcare technology deals include Veritas Capital’s acquisition of a majority stake in supply-chain software company Global Healthcare Exchange this year, joining existing shareholders Temasek and Warburg Pincus in backing the business.
Among the transactions last year was Audax Private Equity and Parthenon Capital’s purchase of revenue cycle management, or RCM, technology and services company Elevate Patient Financial Solutions from Frazier Healthcare Partners and Edgewater Funds for $1 billion to $1.1 billion.
Companies to watch include Ensemble Health Partners, an RCM firm backed by Warburg and Berkshire Partners. Octus reported last week that the company has kicked off a dual-track process exploring a sale or IPO.
At last week’s conference, attendees discussed topics including the recent selloff in software stocks triggered by fears of AI disruption. The first investor noted that in healthcare, AI “is much more of an enablement tool.”
A third healthcare technology investor said that what is creating a moat in healthcare is proprietary data, such as safety monitoring and clinical data.
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