Article
Sluggish M&A Pushes Direct Lenders to Provide Flexible Capital in Healthcare Deals
Large-cap private credit lenders are expanding their toolkit as muted M&A activity and persistent valuation gaps slow traditional dealmaking, according to financing providers at the McDermott Will & Schulte Healthcare Private Equity Conference in Miami Beach last week.
“We are going into the public markets and transacting directly with corporates to deploy capital to either bridge profitability or future M&A,” said one private credit lender, highlighting opportunities beyond traditional first lien loans.
Lenders noted they are increasingly using flexible structures such as asset-based lending, structured equity and corporate financing solutions. Another lender added that his firm is “spending more time on HoldCo and preferred equity solutions.” Dividend recapitalizations and alternative structures are also helping borrowers navigate longer holding periods as exit timelines stretch.
Subsectors to watch for increased deal activity include pharmaceutical and pharma services, lenders said.
Healthcare IT is attracting attention, particularly companies offering AI-native platforms and proprietary datasets. Meanwhile, niche sectors like infusion “will continue to take advantage of some tailwinds especially from demographic and site-of-care shifts,” one lender noted.
By contrast, private lenders are cautious on behavioral health. “We have been largely pivoting away from behavioral health that has been a more challenging space for us,” said a lender, citing census volatility, limited de novo supply and competition from virtual and outpatient models.
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