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1、Global Healthcare Private Equity and M&A Report 2023|First Look This work is based on secondary market research,analysis of financial information available or provided to Bain&Company and a range of interviews with industry participants.Bain&Company has not independently verified any such informatio

2、n provided or available to Bain and makes no representation or warranty,express or implied,that such information is accurate or complete.Projected market and financial information,analyses and conclusions contained herein are based on the information described above and on Bain&Companys judgment,and

3、 should not be construed as definitive forecasts or guarantees of future performance or results.The information and analysis herein does not constitute advice of any kind,is not intended to be used for investment purposes,and neither Bain&Company nor any of its subsidiaries or their respective offic

4、ers,directors,shareholders,employees or agents accept any responsibility or liability with respect to the use of or reliance on any information or analysis contained in this document.This work is copyright Bain&Company and may not be published,transmitted,broadcast,copied,reproduced or reprinted in

5、whole or in part without the explicit written permission of Bain&Company.Copyright 2023 Bain&Company,Inc.All rights reserved.iGlobal Healthcare Private Equity and M&A Report 2023|First LookContentsHealthcare Private Equity Market 2022:The Year in Review and Outlook .1Healthcare Private Equity in a D

6、ownturn .9Life Sciences:White-Hot Competition to Win the Right Deals .181 1At a Glance Down but not out:The first half of 2022 saw a continuation of 2021s record-setting pace for healthcare private equity(HCPE)deal volume and deal value,and while geopolitical uncertainty,inflation,interest rate pres

7、sure,and tight credit did eventually catch up to the market in the third quarter,2022 will still be the second-biggest year on record for HCPE.Narrowing focus:Funds shifted focus to find pockets of opportunity in certain subsectors and geographies;interest in HCIT and life sciences increased;and lar

8、ge deal interest in Asia-Pacific was punctuated by three buyouts valued at over$1 billion in the third quarter.Tight credit:Shifts in central bank policy to combat inflation in North America and Europe resulted in a tight credit market,which limited large-check financing and forced funds to be creat

9、ive to get deals done and provide returns to limited partnerships(LPs).Resilient outlook:HCPE investors face intense competition,rising US interest rates,higher labor costs,and tighter creditbut ample dry powder and a track record of returns ensure healthcare will remain a priority for top firms eve

10、n if winning deals requires becoming more specialized and creative in their approach.Healthcare Private Equity Market 2022:The Year in Review and OutlookIn the second-strongest year on record,funds narrowed their focus and have become more selective.2Global Healthcare Private Equity and M&A Report 2

11、023|First LookNotes:Excludes spin-offs,add-ons,loan-to-own transactions,special purpose acquisitions,and acquisitions of bankrupt assets;based on announcement date;includes announced deals that are completed or pending,with data subject to change;deal value does not account for deals with undisclose

12、d values;values updated based on Dealogic 2020 sponsor classifications;values include net debt where relevantSources:Dealogic;AVCJ;Bain analysis0100200300400500Global healthcare buyout deal value,$billions(excluding add-on deals)20012026036042105187706074708170961015113012211316143015231636174318641

13、97920662115122272692071064291912136273026423440108Year-over-year count(%)63148983023822258174924171303816213269113263965Year-over-year value(%)Global healthcare buyout deal count(excluding add-on deals)90100 ValueQ4 estimate Count2022 estimated count rangeFigure 1:Buyout deal count and deal value ar

14、e on track to reach their second-highest yearDown but not out:HCPE remained resilient in 2022Healthcare private equity(HCPE)activity remained strong in the face of rising geopolitical tensions,high inflation,slumping stock markets,and spiking interest rates.Indeed,2022 is poised to be the second-hig

15、hest year on record for HCPE in disclosed deal value and deal count.The number of deals is expected to fall about 20%30%from 2021s all-time high of 515 deals to around 400 deals in 2022,roughly in line with 2020(see Figure 1).Abrupt changes in central bank monetary policy to fight inflation in North

16、 America and Europe led to a tight credit market that limited large-check financing.This had implications to transaction count,deal size,and deal financing for private equity(PE)of all stripes.Globally,the value of all PE buyouts is poised to fall from 2021s all-time high of$1 trillion,as PE deal ac

17、tivity slows across industries and geographies.While overall buyout activity retracted,HCPE has continued holding a high share of buyout activity.HCPE buyouts represented roughly 20%of global PE activity by deal count in 2022,about twice the share of deal count as 10 years ago.3Global Healthcare Pri

18、vate Equity and M&A Report 2023|First LookNotes:Excludes spin-offs,add-ons,loan-to-own transactions,special purpose acquisitions,and acquisitions of bankrupt assets;based on announcement date;includes announced deals that are completed or pending,with data subject to change;deal value does not accou

19、nt for deals with undisclosed values;values updatedbased on Dealogic 2020 sponsor classifications;values include net debt where relevantSources:Dealogic;AVCJ;Bain analysisGlobal healthcare private equity buyout deal count(excluding add-on deals)Year-over-year change(%)Q12018Q2Q3Q4Q12019Q2Q3Q4Q12020Q

20、2Q3Q4Q12021Q2Q3Q4Q12022Q2Q350202248449923061621186514Figure 2:While buyout activity was strong in the first half of 2022,volume fell substantially in the third quarterDeal flow in H1 2022 maintained the record-setting pace of 2021 and a strong Q1 pipeline persisted into Q2,but geopolitical uncertain

21、ty due to the Russian invasion of Ukraine in concert with global inflationary pressures changed the trajectory for the year.Global HCPE deal volume fell in Q3,and while the 96 deals in Q3 2022 is more than any quarter in 2019,funds that had been slammed with deal flow in 2021 felt a marked slowdown

22、from prior quarters(see Figure 2).Even with the global uncertainty that began early in the year,there were still some impressive exits,with 35 exits valued above$500 million by the end of the third quarter.2022 will end up with many strong showings for HCPE exits despite the slowdown from the record

23、 pace set in 2021.This demonstrates that investors are still willing to lean into compelling macro themes with strong platform assets.Notable exits include:Warburg Pincus exited its investment in primary,specialty,and urgent care provider Summit Health-CityMD through an$8.9 billion sale to VillageMD

24、 with support from Walgreens Boots Alliance(WBA)and an affiliate of Evernorth,a subsidiary of Cigna Corporation.Nordic Capital exited its investment in British specialty diagnostics firm The Binding Site in a deal with Thermo Fisher Scientific Inc.,valued at around$2.6 billion.4Global Healthcare Pri

25、vate Equity and M&A Report 2023|First LookNotes:Excludes spin-offs,add-ons,loan-to-own transactions,special purpose acquisitions,and acquisitions of bankrupt assets;based on announcement date;includes announced deals that are completed or pending,with data subject to change;deal value does not accou

26、nt for deals with undisclosed values;values updatedbased on Dealogic 2020 sponsor classifications;values include net debt where relevantSources:Dealogic;AVCJ;Bain analysisTargetTarget regionAcquirer(s)DescriptionApprox.value($B)AdvarraNorth AmericaBlackstone,CPPBiopharma related services$5.0Covetrus

27、North AmericaCD&R,TPGProvider(HCIT)$4.0IVI RMAEuropeKKRProvider fertility platform$3.2Evident Olympus carve-outAsia-PacificBain CapitalLife science tools$3.1EnvirotainerEuropeEQT Private Equity,MubadalaNautic Partners,Vistria Group,General AtlanticBiopharma related services$3.0PANTHERxNorth AmericaP

28、rovider specialty Rx$2.8Gentiva Certified Healthcare Corp Kindred carve-out North AmericaCD&RProvider hospice care$2.8Informa Pharma IntelligenceEuropeWarburg Pincus,Mubadala,PJSCBiopharma related services$2.6Corden Pharma InternationalEuropeAstorg Partners SABiopharma CDMO$2.6PerkinElmer life scien

29、ce divestitureNorth AmericaNew Mountain CapitalLife science tools$2.5Top 10 deal value,Q1Q3 2022$32Total healthcare buyout deal value,Q1QQ3 2022$75Top 10 value as percentage of total,Q1Q3 202240%45%Figure 3:The 10 largest buyout deals in 2022 totaled nearly$32 billion,around 40%of deal value year-to

30、-dateNarrowing focus:Activity shifted to more resilient investmentsBeginning in Q2,funds started to become more selective,seeking pockets of opportunity in choice sectors,subsectors,and geographies.Funds looked for businesses resilient to a potential inflation-driven downturn or ways to take advanta

31、ge of falling public valuations.From a healthcare subsector perspective,life sciences continued to attract interest from buyout funds,and we have seen a shift in activity toward healthcare information technology(HCIT).Investors see long-term HCIT opportunity around redefining care delivery and accel

32、erating clinical breakthroughs,and in 2022,there was particular interest in buyouts for businesses that will help optimize operations,especially given the possibility of a recession.Six of the top 10 deals were in biopharma,life science tools,and related services,demonstrating that PE funds found wa

33、ys to mitigate the binary pipeline risk of biopharma assets,often by investing in organizations that provide products or services to a broad set of industry participants(see Figure 3).5Global Healthcare Private Equity and M&A Report 2023|First LookFrom a geographical perspective,activity slowed over

34、all,but Asia-Pacific saw a strong interest in large deals,with three deals valued at over$1 billion,reflecting the growing maturity of the market.Deals valued at more than$1 billion in Asia-Pacific in 2022 included Evident,CitiusTech,and iNova Pharmaceuticals.Healthcare technology and technology-ena

35、bled businesses continued to be a very active sector with investment themes focused on honing clinical,operational,and financial workflows as well as data plays across stakeholders.Workflow management:On payer workflow,TPG closed a$2.2 billion deal for Change Healthcares claims-editing business,Clai

36、msXten.Bain Capital acquired LeanTaaS,which provides software solutions for optimizing operations and capacity management.Remote/home care:General Atlantic and CVS led a$300 million Series D investment in Biofourmis,a virtual care and digital medicine-focused HCIT company.Revenue cycle:Veritas Capit

37、al merged two revenue-cycle management(RCM)companiesCoronis Health and MiraMed Global Servicesto create a multispecialty RCM platform.Clinical data:THL acquired a majority stake in Intelligent Medical Objects,an HCIT data enablement company that brings quality clinical data to a range of use cases t

38、o inform better patient care,including clinical documentation and population health management.Life science data:Norstellawhich is backed by Hg Capital,Welsh Carson Anderson&Stowe,and Warburg Pincusadded Citeline(formerly Pharma Intelligence)to its pharmaceutical technology platform via merger.At de

39、al close,the$5 billion company is one of the largest pharma intelligence solution providers,spanning five brands that make up Norstella:Evaluate,MMIT,Panalgo,The Dedham Group,and now Citeline.Abrupt changes in central bank policy to combat inflation in both North America and Europe led to a tight cr

40、edit market that limited large-check financing.Anecdotally,funds suggested that traditional credit financing above$1 billion is largely unavailable,which may delay potential megadeal activity into 2023 or beyond.Available credit has come at much higher interest rates than the past few years,which le

41、d funds to take different approaches to financing to get deals done.All-equity deals:Funds have signaled an interest in pursuing all-equity buyouts that they may recapitalize when the public credit market improves.6Global Healthcare Private Equity and M&A Report 2023|First Look Club deals:We are see

42、ing a continuation of club deals;last year,funds pooled together on large assets like Medline and Athena,and this year the motivation has shifted to solve for funding availability.For example,GHO Capital Partners and Vistria Group joined hands to acquire Alcami,a biopharma contract development and m

43、anufacturing organization(CDMO).Private credit:Firms like Owl Rock Capital,Ares Management,and BlackRock were willing to step in and provide large-debt financing via private debt,with Owl Rock suggesting they had the most requests for checks over$1 billion in their history.As credit availability tig

44、htened,the average buyout deal size fell globally in Q3,particularly in Europe.While the total number of buyouts in Europe has hovered around 2030 deals per quarter since 2021,the total disclosed deal value dropped in Q3 2022.PE sponsors also are shifting focus to M&A within their existing portfolio

45、s,for example,through HCIT tuck-ins,PPM roll-ups,especially in emerging specialties,and midcap biopharma platform building.Outlook for 2023 and beyondHCPE investors face greater competition for assets,higher interest rates from several central banks,tighter credit,labor shortages,and rising labor ra

46、tes.But ample dry powder and a track record of returns ensured a strong year for HCPE investing that continues to attract healthcare-specific funds,and we expect this trend to continue in 2023.Despite the slowdown in HCPE deal flow in the second half of 2022,firms continued to create healthcare-focu

47、sed funds and raise near-record levels of capital.Data from Preqin suggest that firms raised more than 300 HCPE-focused funds in 2022 for the second year in a row,and total assets under management for 2022 vintage funds also approached record highs.Lower profits and lower multiples pushed public equ

48、ity markets down globally in 2022.If those depressed multiples linger in 2023,it could lead to longer hold times that limit deal activity,meaning more competition for deals that do come to market.Investors will likely circle around resilient sectors:HCIT,biopharma,and life science tools are all part

49、icularly recession-resilient sectors based on their fundamental value propositions.The current macro environment may also create opportunities for public-to-private deals,carve-outs,and opportunistic investments.Assets that face significant short-term market headwinds may warrant a closer look in 20

50、23,and funds may find hidden gems by investing against prevailing popular sentiment or taking an opportunistic approach to depressed public valuations.7Global Healthcare Private Equity and M&A Report 2023|First LookThat said,each region will face discrete challenges.North America:The Federal Reserve

51、 signaled it anticipates ongoing increases in the federal funds rate to attain a sufficiently restrictive monetary policy to return to around 2%inflation.This may continue to limit the availability of large-check financing.Economic signals are mixed,and year-over-year inflation seemed to step down i

52、n November even though the labor market remains tight.If the Feds policy moves induce a recession,funds may continue to shift investments to less risky,recession-resilient plays.In past recessions,government focused businesses(such as MA/Medicaid),HCIT,and pharma services have generally done well.Bu

53、t there are different puts and takes this time round as we come off pandemic-high enrollment levels in spaces like Medicaid,and investors may need to see through some near-term turbulence in assets exposed to biotech funding and technology capital budgets.Europe:Europe saw the same limits in large-c

54、heck financing as North America,and this may persist into 2023 as central banks raise rates to fight inflation.As more large-cap PE players move downstream toward smaller deals,midcap PE players are likely to respond to the increased competition by getting more specialized.Activity in the life scien

55、ces sectors will likely continue to grow more competitive in Europe,where a strong track record of innovation in biopharma and life-science tools creates attractive investment opportunities for funds that know the space.Asia-Pacific:Within Asia-Pacific,the macro trends of rising labor rates,rising i

56、nterest rates,and tight credit all have country-specific nuances,and central banks in China,Australia,India,and Japan have all responded differently.While each country faces specific short-term headwinds,HCPE investors in Asia-Pacific benefit from long-term healthcare tailwinds,large stores of Asia-

57、Pacific-specific HCPE dry powder,and a maturing market with a strong pipeline of investable assets.Some HCPE investors have been diversifying their focus from China to markets like Southeast Asia,India,and Japan,as the market navigated the impact of multiple Covid-linked lockdowns,evolving policies,

58、and geopolitical dynamics.That said,activity in China should remain robust,given growing interest from large buyout firms and venture capital.Circumstances could change fast in 2023 or 2024,and activity could rebound quickly.Investors will be working hard to have their proactive strategies ready and

59、 connect with management teams so that they are in a position to act with speed and confidence,especially when the credit markets open back up for large-check financing.8Global Healthcare Private Equity and M&A Report 2023|First LookThere is likely to be a spread of potential outcomes for HCPE for t

60、he next year.Some signals continue to point to a global economic slowdown in 2023.In this scenario,funds may consider updating their downturn playbook based on the section HCPE in a Downturn.On the flip side,in the face of uncertainty in 2023,funds that lean into new sectors may be rewarded.The sect

61、ion Life Sciences:White-Hot Competition to Win the Right Deals offers a view on the challenges involved with investing in biopharma and life science tools and highlights success stories from those subsectors.9 9Healthcare Private Equity in a DownturnAt a Glance Remaining confident in HCPE:Healthcare

62、 private equity(HCPE)has proved more resilient than overall PE activity in prior recessions,with a track record of quick rebounds and compelling returns coming out of the downturn.Navigating current macro challenges:However,the macro environment today is distinct from prior recessions,with inflation

63、ary and credit pressures shaping HCPE as we head into 2023.While the effects of these dynamics are felt across HCPE,the impact is most acutely felt in the provider space.Winning in a downturn:If recessionary trends continue,PE funds have an opportunity to tailor their strategies to meet current chal

64、lenges by targeting downturn-resilient investment themes,being more creative in their deal strategies to make transactions happen in a credit-constrained environment,and updating value creation playbooks to respond to near-term headwinds against revenue expansion.Winning investors will fine-tune the

65、ir playbook to target recession-resilient themes.10Global Healthcare Private Equity and M&A Report 2023|First LookSource:DealEdgeGlobal private equity internal rates of return,by year of entryGlobal healthcare private equity internal rates of return,by year of entry Buyouts completed in first two ye

66、ars after dot-com recessionBuyouts completed in first two years after financial crisis1001020304050607080%200014%2001202002452008122009222010221001020304050607080%200015%200134200230200817200920201023MedianTop and bottom quartileFigure 1:Internal rates of return for healthcare buyouts in the first t

67、wo years after recent recessions have had higher multiples than the years leading into recessionGrounds for optimism:HCPE has proved resilient in prior downturnsIn prior downturns,HCPE remained an attractive area for investment relative to private equity overall.After the 200001 downturn driven by t

68、he dot-com bubble,returns for healthcare deals that closed in the next two years averaged more than 30%(see Figure 1).Similarly,coming out of the global financial crisis in 200809,healthcare deals rebounded quickly;healthcare deals completed in 200910 had higher median returns than deals that closed

69、 the year heading into the financial crisis.This trend holds true for private equity broadly,but for HCPE the returns were particularly attractive:For HCPE transactions in the first two years coming out of a recession,the top quartile earned internal rates of return of roughly 40%or greater(see Figu

70、re 1).Current macro challenges:Inflation and interest rates make this downturn different While we remain confident in HCPEs relative attractiveness in a downturn,no two cycles are the same;if current trends continue,this downturn will have different implications for PE activity writ large and 11Glob

71、al Healthcare Private Equity and M&A Report 2023|First LookHCPE specifically.Unlike the recessions in 200001 and 200809,current macro challenges are fueled by geopolitical uncertainty from Russias ongoing invasion of Ukraine and resulting energy supply insecurity,inflation at levels not seen in deca

72、des,and rising interest rates restricting credit access.Wage inflation has varied by geography but rose to elevated levels in 2022(roughly 5%in the US and roughly 4%in Europe).Healthcare wage inflation is driven by two factors:general goods inflation drives demand for higher compensation,and healthc

73、are-specific labor shortages exacerbate the general trend.Provider businesses are disproportionately exposed to labor cost increases as workforce salaries and wages represent roughly 50%of operating expenses for hospitals and other sites of care;this can be even higher in more labor-intensive provid

74、er businesses such as home health,personal care services,and hospice.While costs are up,reimbursement is only modestly higher as rates are negotiated on a multiyear basis with payers or adjusted annually by governments.If these dynamics result in depressed 2022 EBITDA values for provider businesses,

75、sponsors may look to hold their provider businesses through the downturn,reducing potential provider deal volumes in Q4 and into 2023.Provider-based businesses(excluding related services and HCIT)typically represent around 20%30%of HCPE buyout transactions.While we have yet to see a disproportionate

76、 decline in provider activity as of Q3,a provider-specific slowdown in 2023 could impact HCPE deal flow volumes.In parallel to the challenges presented by labor inflation,changes in central bank policy to temper price pressures in Europe and North America have restricted financing availability and d

77、riven up interest rates.Deal activity in Q3 2022 reflects signs of these financing constraints,with fewer overall deals done vs.the first half of 2022(down 33%vs.Q1 2022 and down 18%vs.Q2 2022)(see Figure 2).Financing constraints are affecting two areas in particularlater-stage growth assets and sma

78、ll and midcap(SMID-cap)biopharma assets.Later-stage growth equity assets have seen multiples decline due to changes in the macro environment and far fewer deals announced.Some late-stage companies will be able to avoid fund-raising at a down round given strength in business and financial runway,but

79、others will need to come back to the market to raise funds to survive.The focus of SMID-cap biopharma assets on earlier-stage drug development inherently creates a higher risk profile,making financing less available and more expensive for such deals;we expect the headwinds for SMID-cap biopharma to

80、carry over to the service providers who focus on SMID-cap biopharma and early-stage drug development.12Global Healthcare Private Equity and M&A Report 2023|First LookNotes:Excludes spin-offs,add-ons,loan-to-own transactions,special purpose acquisitions,and acquisitions of bankrupt assets;based on an

81、nouncement date;includes announced deals that are completed or pending,with data subject to change;deal value does not account for deals with undisclosed values;values updatedbased on Dealogic 2020 sponsor classifications;values include net debt where relevantSources:Dealogic;AVCJ;Bain analysisGloba

82、l healthcare buyout deal count(excluding add-on deals)Provider deal count share(%)Q12018Q2Q3Q4Q12019Q2Q3Q4Q12020Q2Q3Q4Q12021Q2Q3Q4Q12022Q2Q326271623312230273022292632212729343632Provider buyouts(excluding related services and healthcare IT)Other buyoutsFigure 2:The provider subsector has maintained

83、its share of deal count despite inflationary and labor pressuresWinning in a downturn:Investing in recession-resilient themesWhile the current macro context creates inherent challenges for investors,it also creates compelling pockets of opportunity.Sponsors are seeking out investment themes that pla

84、y both to long-term trends and are poised to be resilient in a recession.Similarly,constraints on capital and inflationary pressures are causing PE sponsors to be more creative in how they get deals done.Recessionary and inflationary pressures will have different consequences across healthcare subse

85、ctors.At a high level,we expect provider businesses to be hit harder by a recession and inflation,while biopharma and life science tools businesses are likely to be more insulated(see Figure 3).Within each subsector,however,assets face varying levels of exposure to the current macro challenges,inclu

86、ding staffing shortages,rising labor costs,supply-chain constraints,and depressed consumer demand.Assets whose business models or broader end-market trends provide insulation from a downturn are well positioned as near-term investment opportunities;their fundamentals also position them to be attract

87、ive bets coming out of a recession.13Global Healthcare Private Equity and M&A Report 2023|First LookNote:Bubble sizes reflect 2022 North America healthcare buyout disclosed deal value for first three quartersSources:Bain 2022 Global Healthcare Private Equity and M&A Report;Bain Healthcare IT ReportL

88、imited abilityto pass onAbility to pass onInflation increasesdemandInflationsensitivityRecession sensitivityHighLowLowHighNo effectReduced demand,lower marginsLimited recession effect,high inflation effectLimited recessionand inflation effectHigh recession effect,limited inflation effectNegativerece

89、ssion andinflation effectProviderHCITTotal=$75B2022 1Q3Qdeal valueof subsectors$10billionMed-techBiopharma andlife science toolsPayerFigure 3:Macroeconomic factors have different effects on each subsector of healthcare Payer/provider Nondiscretionary provider specialties with high private pay exposu

90、re:Specialties with favorable payer mixes(such as more cash pay or private pay),attractive consumer demographics,and more limited reliance on patient financing are likely to be more insulated and better positioned to maintain margins.Specialties like veterinary,dental,radiology,oral surgery,and visi

91、on have historically been less affected in a downturn,making them interesting investment opportunities this go-round as well.Recent examples include AEAs acquisition of AmeriVet and TSGs acquisition of Specialty Dental Brands.That said,some subsectors that are more discretionary in nature,such as de

92、rmatology and medical aesthetics,may be hit harder.Next-gen office-based specialties:Subsectors like cardiology and orthopedics that are riding site-of-care shift and value-based care penetration tailwinds are likely to remain attractive.This trend can be seen through the continued expansion of Webs

93、ter Equity Partners Cardiovascular Associates of America(CVAUSA)cardiology platform and Welsh,Carson,Anderson&Stowes United Musculoskeletal Partners(UMP)orthopedics platform.14Global Healthcare Private Equity and M&A Report 2023|First Look Medicaid services:Medicaid enrollment tends to increase in d

94、ownturns due to a rise in unemployment;outsourced service providers are also positioned to help state agencies effectively manage their costs and spending.For example,Carlyle expanded on this theme by merging Kepro with CNSI.Investors considering plays in Medicaid services should take note of the im

95、pact of potential enrollment redetermination in 2023.HCIT Operational efficiency:HCIT businesses that allow companieswhether provider groups or biopharma assetsto“do more with less”will be attractive as companies look to manage their labor costs and turn to tech as a tool to drive higher EBITDA.Bain

96、 Capitals LeanTaaS provides software solutions for optimizing operations and capacity management.Berkshire Partners and Warburg Pincus coinvestment in Ensemble Health Partners supports revenue cycle management through a combination of services and technology.Welsh,Carson,Anderson&Stowe brought toget

97、her EnableComp and Argos Health,a revenue cycle platform specializing in the management and resolution of complex claims.Sticky revenue:While new customer adoption typically slows during a downturn,mission-critical HCIT businesses with recurring revenue models tend to have sticky customer relationsh

98、ips and better visibility into financial outlook.LeanTaaS and Intelligent Medical Objects are both built on software-as-a-service-based models that should benefit from stable rates and a sticky user base.Biopharma and life science tools Contract services:Three types of contracted biopharma assets wi

99、ll prove more resilient in a recession:first,assets that focus on research and early development(clinical research organi-zation,or CROs;specialized contract development and manufacturing organization,or CDMOs).Second,assets that focus on commercial-scale manufacturing,ideally for large pharma spons

100、ors.And third,assets that focus on late-stage development work on drugs that are expected to enjoy clear clinical differentiation.For assets that fit one of those descriptions,their customers revenue stream and ability to invest in new services and technologies is more protected than assets that ser

101、ve late-stage biotechs focused on a single development program that has failed to attract a large pharma partner.Bridgepoints investment in CDMO Novasep(via their Pharmazell portfolio company)highlights CDMOs attractiveness.In a downturn,late-stage biotechs may cut their spend as debt financing drie

102、s up and issuing equity becomes unfavorable.Assets that serve those types of customers may face a harsher environment in 2023.15Global Healthcare Private Equity and M&A Report 2023|First Look Commercialization services:Given their focus on later-stage drugs(and thus larger pharma sponsors)and the co

103、ntinued challenges of bringing new drugs to market,commercialization-services providers are expected to remain attractive.Astorgs acquisition of Open Health speaks to this type of asset.Life science tools:Life science tools companies with a“razor and blade”approach to products or subscription model

104、for services may prove particularly recession resilient as they have a sticky user base with reasonable price elasticity.New Mountain Capitals acquisition of the three life science tools divisions from PerkinElmer,including OneSource,speaks to this type of asset.OneSources equipment servicing busine

105、ss may prove sticky with customers even in a downturn as biotechs try to optimize performance with existing equipment versus investing in new tools.Downturn dealmaking:Applying creative deal strategiesRelative to prior years,2022 has already seen a mix shift in deal types as sponsors look to get dea

106、ls done within the current macro constraints.For example,in North America,public-to-private deals have made a much larger contribution to total deal value than in the past three years(see Figure 4).If tight credit continues into 2023,this may limit both the number of deals that come to market throug

107、h traditional processes and the ability of sponsors to finance deals.In parallel,macro uncertainty may create concerns about near-term profitability negatively impacting deal quality.To get deals done,funds may need to continue to broaden the aperture on their deal strategy.For example:Public-to-pri

108、vate:Off-peak public market valuations present opportunities for take-private deals.As public markets fluctuate in response to uncertainty,many companies will be unable to realize the valuations that characterized 2021 IPOs,creating opportunities to take companies private at favorable multiples.In M

109、ay,Clayton Dubilier&Rice and TPG announced plans to acquire Covetrus,a global leader in animal-health technology and services,at an enterprise valuation of approximately$4 billion.Patient Square Capital took Hanger private in October in a deal valuing the company at over$1.25 billion.Carve-outs:We a

110、nticipate more carve-outs as companies refocus in a downturn and unlock cash for strategic priorities within their core.Scale deals that speak to this trend include Gentiva Certified Healthcares carve-out from Humana by Clayton Dubilier&Rice.Looking ahead to 2023,16Global Healthcare Private Equity a

111、nd M&A Report 2023|First LookNotes:Excludes spin-offs,add-ons,loan-to-own transactions,special purpose acquisitions,and acquisitions of bankrupt assets;based on announcement date;includes announced deals that are completed or pending,with data subject to change;deal value does not account for deals

112、with undisclosed values;values updated based on Dealogic 2020 sponsor classifications;values include net debt where relevantSources:Dealogic;AVCJ;Bain analysisShare of North American healthcare buyout value,deals over$250 million020406080100%201913%202024%202114%2022 excluding Q4Carve-outPrivate-to-

113、sponsorPublic-to-privateSponsor-to-sponsor46%Percentage ofcarve-out andpublic-to-privateFigure 4:Public-to-private and carve-out deal values have risen in light of depressed public market valuationscompanies including Medtronic,3M,and Johnson&Johnson have already announced plans to divest parts of t

114、heir healthcare portfolio and other corporates may follow suit,creating potential carve-out opportunity for PE funds.Minority recapitalizations:This approach creates opportunities for both buyers and sellers in a capital-constrained world.For buyers,minority investments mean buyers can sidestep havi

115、ng to refinance existing leverage and can benefit from existing lenders familiarity with the business.For sellers,partial exits offer PE funds a mechanism to drive returns for their existing LPs while continuing to hold a stake in the asset to capitalize on future growth potential.Opportunistic inve

116、sting:The downturn may create more opportunities to play within distressed assetsfor example,among SMID-cap biopharma players,provider businesses that are differentially hit hard by macro trends,or assets affected by changes in regulation(for example,the No Surprises Act).Sponsors can be thoughtful

117、in how they structure deal terms to bound the downside risk and/or prioritize assets where they have conviction in the assets underlying strengths or longer-term secular tailwinds,with the hopes of generating a higher return at exit.17Global Healthcare Private Equity and M&A Report 2023|First Look P

118、latform buy and build:While tuck-ins for existing platforms are tried-and-true value creation strategies,they may become differentially actionable in a recession.The smaller size of these deals makes them easier to fund in tight credit markets(through free-cash flow or by leveraging relationships wi

119、th existing lenders who know the core business).Similarly,in the provider space,independent practices may be more interested to sell to the right PE partner to help them navigate the effects of a contraction on their business.Several scale PE platforms with potential for continued rollups traded,suc

120、h as IVIRMA to KKR in fertility.In the gastroenterology space,GI Alliance announced a physician-led buyout facilitated by a$785 million noncontrol investment from Apollo Hybrid Value funds to support continued acquisition growth.The next year is likely to present new challenges for private equity in

121、vestorsboth in healthcare and beyond.HCPEs resiliency in prior cycles and underlying market tailwinds suggest this sector should remain well-positioned in a downturn once again.However,investors will need to fine-tune their investment theses and develop new playbooks to win good deals in this enviro

122、nment.If investors are able to place the right bets,they stand to benefit from the strong returns seen by top-quartile HCPE deals in prior downturns.1818At a Glance Biopharma and life science tools are attractive:Within these two subsectors,more than 600 healthcare buyout deals have been executed ov

123、er the past five years globally,fueled by strong end-market growth tailwinds,recession resistance,and attractive returns for PE;given that these trends are expected to continue,executing coherent deal strategy in biopharma and life science tools has become a must-have for US/EU funds.Subsectors with

124、in life sciences matter:Out of the roughly 410 US/EU biopharma and life science tools buyouts executed over the past five years,more than 80%have been in eight subsectors,each with a different set of dynamics.Concentrated dealmakers,long tail of participants:About 65%of biopharma and life science to

125、ols deals in the US and Europe were conducted by around 50 funds with a large amount of midmarket participation.Lessons learned from dealmakers:Funds that have a repeatable approach to closing deals have a very sharp perspective on“where to play”and“how to win”and have flexed the type of deal they a

126、re prepared to do to be successful.Differentiation in subsectors is increasingly driven by the quality of science and depth of expertise in a specific disease or technology.Life Sciences:White-Hot Competition to Win the Right DealsMore funds are on the hunt,but a small group of dealmakers account fo

127、r most of the activity.19Global Healthcare Private Equity and M&A Report 2023|First LookNotes:Excludes spin-offs,add-ons,loan-to-own transactions,special purpose acquisitions,and acquisitions of bankrupt assets;based on announcement date;includes announced deals that are completed or pending,with da

128、ta subject to change;deal value does not account for deals with undisclosed values;values updated based on Dealogic 2020 sponsor classifications;values include net debt where relevantSources:Dealogic;AVCJ;Bain analysisGlobal provider,payer,and medtech deal count(rounded)201317770 dealsMedtechProvide

129、rPayer2018Q3 2022 1,200 deals50%60%growth201317300 dealsBiopharmaLife sciences tools2018Q3 2022630 deals110%growthGlobal biopharma and life sciences tools deal count(rounded)Figure 1:Life sciences deal activity outpaced other subsectors over the past decade“White-hot”deal market:Life sciences is an

130、attractive space to play for PE The life sciences deal marketthat is,marketed biopharma products and the ecosystem of companies supporting their research,development,and commercializationhas been an attractive place for PE to put capital to work.These marketswhich include life science tools(LSTs),di

131、agnostics(Dx),lab services,outsourced biopharma services,and pharma software/ITare historically recession resistant and have all been driven by strong end-market growth tailwinds.These sectors have also seen strong returns within healthcare,which itself is an attractive industry vertical.Given all o

132、f these dynamics,the volume of PE dealmaking has increased significantly in this area,and it has become a“must-win”sector going forward for funds.Deal volume in the past five years in biopharma and life science tools has increased 110%compared with the previous five-year period(see Figure 1).Payer,p

133、rovider,and medtech deal activity increased only 50%60%across those same two time periods.We count more than 600 unique buyout deals globally for life sciences assets completed since 2018(note:excluding preclinical and clinical stage therapeutic investments given their risk/return profile).20Global

134、Healthcare Private Equity and M&A Report 2023|First LookNotes:Excludes spin-offs,add-ons,loan-to-own transactions,special purpose acquisitions,and acquisitions of bankrupt assets;based on announcement date;includes announced deals that are completed or pending,with data subject to change;deal value

135、does not account for deals with undisclosed values;values updated based on Dealogic 2020 sponsor classifications;values include net debt where relevantSources:Dealogic;AVCJ;Bain analysisUS and European life sciences deals,2017H1 2022(rounded)020406080100%Life science tools,diagnostics,and related se

136、rvicesReagents,instruments,and toolsDiagnosticsClinical lab servicesOther90(20%of total)Biopharma and related servicesPharmaceutical products(including generics)Contract research organizationsContract development and manufacturing organizations,contract packaging organizations,distribution businesse

137、sCommercialization and consultingHealthcare ITOther320(80%of total)Figure 2:Eight categories represent the vast majority of buyout activity within biopharma and life science tools in the US and EuropeThe internal rate of return(IRR)for life sciences deals over the past 10 years has been around 25%,w

138、ith the top quartile reaching about 50%+IRR across biopharma products and services,and life science tools and services.The variance in returns in life sciences sectors is also wider than other healthcare investment areas,highlighting the effects of technology and regulatory risk embedded in these in

139、vestments and the value of specialization in mitigating those risks.These deals tend to be earlier in the life cycle of an asset,and therefore bear a spikier risk/return profile.Placing the right bets:Subsectors within biopharma and life science tools matter A sector-by-sector analysis of the deals

140、done in the US and Europe reveals that eight subsectors represent the vast majority(85%90%)of the deals done within PE(see Figure 2).Given that each sector has very different business models,sets of assets,and winning investment theses,it is our strong belief that funds need to develop a custom view

141、 on which assets they are going to“hunt”for.Out of the roughly 410 unique life sciences deals completed for US/EU assets between 2017 and mid-2022,75%80%were pharma-related;the remaining 20%25%were in life science tools or 21Global Healthcare Private Equity and M&A Report 2023|First Lookdiagnostics.

142、Within biopharma deals,there were five major sectors of activity that each represented at least 25 dealsCROs;CDMO/contract packaging organization/distribution;commercial pharma products;commercialization services;and pharma IT.Within life science tools,two major sectors of activity represented at le

143、ast 25 dealsreagents/instruments/tools and diagnostics;clinical lab services represented a smaller number of deals completed but were mostly all in the EU.Life sciences landscape:Despite upside,biopharma and life science tools remain fragmented,challenging spaces to play PE buyout participation in b

144、iopharma and the life science tools subsector is widespread,with around 200 funds participating in around 410 unique deals.However,there is a concentration of high-velocity PE dealmakers who are responsible for most of the activity.A large fraction of dealmakers are the midmarket life sciences speci

145、alists,although some large-cap funds have been high-velocity dealmakers as well.There were roughly 460 PE transactions for US-and European-based biopharma and life science tools assets between 2017 and the end of the first half of 2022(see Figure 3).Roughly 410 were Figure 3:Recent life sciences buy

146、out activity in the US and Europe has been concentrated among a small group of funds that did three or more dealsNotes:Excludes spin-offs,add-ons,loan-to-own transactions,special purpose acquisitions,and acquisitions of bankrupt assets;based on announcement date;includes announced deals that are com

147、pleted or pending,with data subject to change;deal value does not account for deals with undisclosed values;valuesupdated based on Dealogic 2020 sponsor classifications;values include net debt where relevantSources:Dealogic;AVCJ;Bain analysisNumber of large private equity deals of US and European li

148、fe sciences companies,2017H1 2022(rounded)Total deals460 dealsUnique deals410 deals 10+deals80 deals6 669 deals80 deals111135 deals130 deals323212 deals170 deals150150 Numberof fundsMultifund deals50 deals22Global Healthcare Private Equity and M&A Report 2023|First Look“unique”deals,and roughly 50 d

149、eals were multifund.In total,around 200 PE firms participated in at least one life sciences deal,and around 170 of those made one to two investments during that time.The number of unique funds participating in a life sciences deal increased from about 45 in 2017 to around 80 in 2021,reflecting not o

150、nly the presence of more“hunters,”but also the increased productivity/activity of funds focusing on life sciences as a sector.Some 4550 PE firms were responsible for 290 deals(65%)of those closed(at least three-plus closed deals).Midmarket PE funds with a life sciences focus represent 40%50%of the t

151、op 50 dealmakers(which include Arsenal Capital,Ampersand,GHO,Archimed).Some large-cap PE funds each closed four-plus life sciences dealsCarlyle,EQT,Astorg,GTCR,Nordic Capital,Advent,Blackstone,and KKR.As the level of interest in biopharma and life science tools investments has increased,we have also

152、 observed changes in the deal processesexacerbated by the“boom”in post-Covid dealmakingand changes in the underlying nature of the businesses being acquired that have created additional complications for potential investors:Auction processes:Sellers used auction processes with larger pools of bidder

153、s,shortened bid periods,and limited access to management data to drive more aggressive valuations and outcomes.Competition with strategics:Rapid maturation and inflection points in demand related to areas such as cell and gene therapy created intense interest from strategic buyers for smaller assets

154、 that historically have traded sponsor to sponsor,driving multiples higher and creating a scarcity of available assets:This phenomenon was acutely felt at the intersection of LSTs and manufacturing,with Thermo Fisher and Catalent acquiring viral vector CDMOs Brammer and Paragon,respectively,and play

155、ers like Thermo Fisher,Sartorius,and Cytiva(Danaher)aggressively acquiring bioprocessing specialists with unique offerings for cell and gene therapy applications such as PeproTech(cytokines for research and good manufacturing practices)and BIA Separations(viral vector-focused chromatography technolo

156、gy).Diligence complexity:Differentiation in subsectors is increasingly driven by the quality of science and depth of expertise in a specific disease or technology,and thus more challenging for many investors to evaluate.23Global Healthcare Private Equity and M&A Report 2023|First LookTogether,these

157、challenges have raised the bar for private equity firms to execute successful investments within the biopharma and life science tools landscape.Funds that have closed five or more deals in biopharma and life science tools often have focused teams,great relationships with VC and small-cap focused fee

158、der funds,and a willingness to participate in more deals at smaller ticket sizes with a higher risk profile.Lessons learned from dealmakers:Sponsor can mitigate the challenges within biopharma and life sciences Analysis of life sciences deal activity reveals the ways in which dealmakers have been th

159、oughtful about where to play and how to win.They have deployed a set of strategies to overcome some of the main challenges we see in life sciences deal participation for PE:Networking:Build and utilize a wide network of outside advisers with scientific and commercial acumen to proactively vet scient

160、ific trends,identify subsectors of focus and“gem”assets within those areas,and prioritize deal strategies and value creation opportunities early in the investment process.Talent strategy:Deal teams with scientific backgrounds(PhDs,MDs)focused on the life sciences sectorand sometimes subsectors withi

161、n life sciencescan overcome scientific,technical,and regulatory expertise hurdles needed to build conviction on a theme and target early in a process(or preprocess)and effectively prewire and manage challenging dynamics with”generalist”investment committees(ICs)to ensure competitive positioning in p

162、rocesses.Portfolio effects:Dealmakers often“double down”and make multiple investments within a sector and across subsectors to leverage shared,collective expertise and employ pattern recognition to create value across their platforms:Arsenal Capital has built scale platforms across multiple areas of

163、 the outsourced services market(WCG in institutional review board and clinical trial support;Certara in software-aided drug discovery;CellCarta in biomarker and related lab services;Lumanity in commercialization).GHO has made a series of separate investments in a range of distinctive CDMOs,such as A

164、rdena,FairJourney Biologics,RoslinCT,and Sanner.Risk profile:While the risk profile of preclinical/clinical stage assets is only addressable for a subset of PE funds,some large-cap funds have been building out capabilities to support investment in this area.24Global Healthcare Private Equity and M&A

165、 Report 2023|First LookFlexibility:Given vendor fragmentation,scale asset scarcity,and rich valuation multiples on category leaders,dealmakers have gotten creative in their structures to access a wider range of deals.Examples include:Platform building:Behrman Capital used tuck-in acquisitions to hel

166、p its clinical research organization(CRO)Emmes build a set of unique capabilities that helped transform the business from a government-focused CRO to a specialty CRO serving industry sponsors.Public-to-private:Gurnet Point,Patient Square Capital,and Webster Equity Partners took Radius Health private

167、 to invigorate the trajectory of its commercial-stage osteoporosis asset,Tymlos,while sharpening the focus of its pipeline and reducing noncore development costs.Technology/growth bets:KKR has acquired through its Gamma Biosciences platform four earlier-stage companies that provide a variety of inno

168、vative biomanufacturing materials or equipment utilized in the manufacture of advanced therapeutics like cell and gene therapies.Forging a path forward for PE:Sponsors will need to define their unique strategiesWe continue to believe that life sciences will be a long-term attractive place for PE to

169、participate,although there may be some nearer-term noise given the factors currently impacting the economy and the biotech funding cycle dynamics.That said,it is not an easy place for funds to navigate successfully.We believe that funds have to wrestle with a number of questions to define their stra

170、tegy:What is our participation model in life sciences deals?Are we looking for only the premium,category leader assets?Are we prepared to dig deep to meet valuation expectations?Do we know/are we tracking the assets that are likely to come to market in the next few years?Are we developing unique ang

171、les around the deal thesis to invigorate the next wave of growth?Are we going to compete with life sciences specialists and invest early in technology/growth/platform bets?If yes,whats our strategy to build our internal competencies and processes,along with external advisory teams?Are we going to us

172、e innovative deal strategies to put money to work?25Global Healthcare Private Equity and M&A Report 2023|First Look Which of the life sciences subsectors are we participating in(and which are we not)?What are our unique investment thesis and connections in the space?How can we keep ahead of the comp

173、etition as more funds enter the space?How can we avoid spending time on deals that are going to be fought over fiercely?Can we stretch the“type”of deal we do to cover a broader range of transactions?Would a public-private,or a carve-out,or a growth-equity investment fund ever be on the table?Would w

174、e ever stretch into biopharma therapeutics?Given the opportunities for compelling returns within life sciences,the bar is high to win the right deals as competition for these assets holds strong and valuations have run up,even within the current macro context.Clearly defining a life sciences strateg

175、ywhere a fund will choose to play and what gives that fund a right to winwill be critical,both in the face of a downturn and beyond.26Global Healthcare Private Equity and M&A Report 2023|First LookKey contacts in Bains Healthcare Private Equity teamHealthcare Private Equity team leadersNirad Jain in

176、 New York(Nirad.J)Kara Murphy in Boston(Kara.M)Franz-Robert Klingan in Munich(Franz-Robert.K)Dmitry Podpolny in London(Dmitry.P)Alex Boulton in Singapore(Alex.B)Vikram Kapur in Singapore(Vikram.K)Healthcare and Life Sciences practice leadersTim van Biesen in New York(Tim.vanBiesenB)Vikram Kapur in S

177、ingapore(Vikram.K)Loc Plantevin in Paris(Loic.P)Joshua Weisbrod in New York(Joshua.W)Healthcare Private Equity team membersIshaan Anand in San Francisco(Ishaan.AnandB)Roch Baranowski in Warsaw(Roch.B)Jon Barfield in New York(Jon.B)Alan Barnes in New York(Alan.BarnesB)Eric Berger in Boston(Eric.B)Pat

178、rick Biecheler in Paris(Patrick.B)Alex Boulton in Singapore(Alex.B)Michael Brookshire in Dallas(Michael.B)Kevin Chang in Hong Kong(Kevin.C)James Cleary in Boston(James.C)Benjamin Cooke in San Francisco(Benjamin.C)Cira Cuberes in Madrid(Cira.C)Evan Dadosky in Chicago(Evan.DadoskyB)Justin Doshi in Atl

179、anta(Justin.D)Caitlin Dowling in New York(Caitlin.D)Jason Evers in Chicago(Jason.E)Aaron Feinberg in New York(Aaron.F)Sharon Fry in New York(Sharon.F)Parijat Ghosh in New Delhi(Parijat.G)27Global Healthcare Private Equity and M&A Report 2023|First LookKai Grass in Dsseldorf(Kai.G)Justas Grigalauskas

180、 in London(Justas.G)Jeff Haxer in Chicago(Jeff.H)Sarah Hershey in Boston(Sarah.H)Sarwar Islam in London(Sarwar.I)Todd Johnson in New York(Todd.J)Kalyan Jonnalagadda in New York(Kalyan.J)Laila Kassis in Boston(Laila.K)Tom Kidd in Singapore(Tom.K)Christian Langel in Zurich(Christian.L)Jeremy Martin in

181、 Atlanta(Jeremy.M)Dieter Meyer in Zurich(Dieter.M)Giovanni Battista Miani in London(GiovanniBattista.M)Kenji Mitsui in Tokyo(Kenji.MitsuiB)Dave Nierenberg in Boston(Dave.N)Homer Paneri in Mumbai(Homer.P)Christoffer Precht in Stockholm(Christoffer.P)Anshul Rana in Boston(Anshul.RanaB)Derek Riesenberg

182、 in Boston(Derek.R)Christoph Schlegel in Frankfurt(Christoph.S)Ben Siegal in Boston(Ben.S)Jason Slocum in Boston(Jason.S)Quinn Solomon in San Francisco(Quinn.S)Monika Sood in New Delhi(Monika.SoodB)Dale Stafford in Washington,DC(Dale.S)Dhruv Sukhrani in Dubai(Dhruv.SukhraniB)Matt Sullivan in San Fra

183、ncisco(Matt.S)Simon Sun in Shanghai(Simon.S)Mike Vandenberg in Denver(Michael.VandenbergB)Daphn Vattier in Paris(Daphne.V)Jim Verbeeten in Tokyo(Jim.VerbeetenB)James Viles in Sydney(James.V)Jon Webber in Atlanta(Jon.W)Jeff Woods in Boston(Jeff.W)Grace Wynn in Boston(Grace.W)Bold ideas.Bold teams.Ext

184、raordinary results.Bain&Company is a global consultancy that helps the worlds most ambitious change makers define the future.Across 64 cities in 39 countries,we work alongside our clients as one team with a shared ambition to achieve extraordinary results,outperform the competition,and redefine indu

185、stries.We complement our tailored,integrated expertise with a vibrant ecosystem of digital innovators to deliver better,faster,and more enduring outcomes.Our 10-year commitment to invest more than$1 billion in pro bono services brings our talent,expertise,and insight to organizations tackling todays urgent challenges in education,racial equity,social justice,economic development,and the environment.Since our founding in 1973,we have measured our success by the success of our clients,and we proudly maintain the highest level of client advocacy in the industry.For more information,visit