Here are the six factors private equity investors find most compelling, according to the Astor Group's "Investment in the Healthcare Industry" white paper. For a copy of the full report, click here.
1. Opportunity for improved business models. The fragmented competitive landscape of the healthcare services industry affords a multitude of opportunities for private equity investors to increase efficiencies and returns. Investors are drawn to the opportunity to improve mature segments with traditional models, to invest in new business models that provide improved quality of care with lower costs to the healthcare system and to consolidate existing businesses.
2. Diversity. Within the healthcare services subsector, diverse subgroups enjoy above-market growth and afford attractive investment opportunities. These subgroups include ASCs, dialysis centers, acute care hospitals, physician practices, specialty hospitals, long-term care facilities, rehabilitation hospitals, radiation therapy centers, cancer centers, distributors, managed care, skilled nursing facilities, physical therapy centers, clinical labs, diagnostic imaging centers, ambulance services, home health services, hospice care, "torefront" medicine, disease management, practice management and behavioral health.
3. Platform for growth. Traditionally, private equity investors are attracted to scalable platforms with sound operating models and above-market growth prospects. Such opportunities can be applied to fragmented geographical markets around the country. In particular, clinics/ outpatient centers, ambulatory surgical centers and dialysis centers are viewed as highly leveragable platforms that satisfy these growth criteria.
4. Risk profile. Although most healthcare companies possess some degree of regulatory and reimbursement risk, private equity investors gravitate towards companies that have large, predictable cash flows and have a stable reimbursement environment, such as acute care services. When possible, investments in companies that are less reliant on uncertain reimbursement rates are preferred.
5. Non-cyclical. The overall healthcare industry is widely viewed as being well-insulated from economic downturns. As a result, good companies that offer a better mix of quality and cost should reap substantial profits, regardless of the economic climate.
6. Demographics. Like most healthcare subsectors, the healthcare services market is expected to benefit from an aging population, particularly in the near-term. Additionally, an overburdened hospital system has led many patients to seek alternative services, driven by both cost and convenience. This trend is expcted to continue in the near-term as healthcare reform is implemented and over 30 million newly insured patients enter the system.
Learn more about Astor Group. Astor Group is a global M&A and strategic advisory firm that partners with clients to raise capital, expand into new markets, buy and sell businesses and solve financial and strategic challenges.
Read more analysis from Astor Group:
- 3 Most Commonly Applied ASC Valuation Approaches
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1. Opportunity for improved business models. The fragmented competitive landscape of the healthcare services industry affords a multitude of opportunities for private equity investors to increase efficiencies and returns. Investors are drawn to the opportunity to improve mature segments with traditional models, to invest in new business models that provide improved quality of care with lower costs to the healthcare system and to consolidate existing businesses.
2. Diversity. Within the healthcare services subsector, diverse subgroups enjoy above-market growth and afford attractive investment opportunities. These subgroups include ASCs, dialysis centers, acute care hospitals, physician practices, specialty hospitals, long-term care facilities, rehabilitation hospitals, radiation therapy centers, cancer centers, distributors, managed care, skilled nursing facilities, physical therapy centers, clinical labs, diagnostic imaging centers, ambulance services, home health services, hospice care, "torefront" medicine, disease management, practice management and behavioral health.
3. Platform for growth. Traditionally, private equity investors are attracted to scalable platforms with sound operating models and above-market growth prospects. Such opportunities can be applied to fragmented geographical markets around the country. In particular, clinics/ outpatient centers, ambulatory surgical centers and dialysis centers are viewed as highly leveragable platforms that satisfy these growth criteria.
4. Risk profile. Although most healthcare companies possess some degree of regulatory and reimbursement risk, private equity investors gravitate towards companies that have large, predictable cash flows and have a stable reimbursement environment, such as acute care services. When possible, investments in companies that are less reliant on uncertain reimbursement rates are preferred.
5. Non-cyclical. The overall healthcare industry is widely viewed as being well-insulated from economic downturns. As a result, good companies that offer a better mix of quality and cost should reap substantial profits, regardless of the economic climate.
6. Demographics. Like most healthcare subsectors, the healthcare services market is expected to benefit from an aging population, particularly in the near-term. Additionally, an overburdened hospital system has led many patients to seek alternative services, driven by both cost and convenience. This trend is expcted to continue in the near-term as healthcare reform is implemented and over 30 million newly insured patients enter the system.
Learn more about Astor Group. Astor Group is a global M&A and strategic advisory firm that partners with clients to raise capital, expand into new markets, buy and sell businesses and solve financial and strategic challenges.
Read more analysis from Astor Group:
- 3 Most Commonly Applied ASC Valuation Approaches
- 5 Most Attractive ASC Specialties