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Provident Healthcare Partners Provident Healthcare Partners

Q4 2023 Healthcare Services Private Equity Update

Provident Healthcare Partners
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Q4 2023 Healthcare Services Private Equity Update

Healthcare PE activity in Q4-23 presented a mix of pessimism that persisted throughout 2023 but illustrated broader confidence in the healthcare sector versus other industries. Macroeconomic doubt remained considerable in Q4-23, but investors expect conditions to become more favorable in 2024. Investors are also coming to the realization that interest rates in the U.S. will remain elevated (above 4%) well into 2024, but off from 2023 highs. Despite these headwinds, many investors expect to increase their transaction volume of dealmaking as funds still have elevated amounts of capital that must be deployed. Healthcare services did not see many blockbuster deals in 2023, and the same was true in Q4-23, however, there was robust lower middle market deal activity comprising small platforms and add-on acquisitions.

Valuations have also softened compared to the highs seen two years ago, but many investors have taken the attitude that this is more of a reset backed to historical valuations prior to the COVID-19 pandemic. PE exits have also continued to decline off 2021 highs and even 2022, owing part to fruitful and eager IPO markets, and competition from SPACs. Rather than exit platforms in 2023, PE firms and its portfolio companies are gearing up for 2024 and 2025 exits. Platforms that are focusing on both clinical and operational excellence will be rewarded in the future as the appetite for high quality assets remains elevated, and the supply and demand imbalance for quality assets becomes greater.

Provident recently attended the 42nd Annual JPM Healthcare Conference in San Francisco and was encouraged by the level of optimism and eagerness from the investor community compared to 2023’s conference. Provident anticipates heightened healthcare PE activity and PE exits compared to last year, as investors seek to deploy and return capital to LPs.

To print and download the Healthcare Services Private Equity Update report, please click below…

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