Healthcare Private Equity in 2025: A Year of Megadeals and Strategic Shifts

The Bain & Company Global Healthcare Private Equity Report 2025 reveals a dynamic landscape marked by surging deal values, evolving investment strategies, and shifting regional opportunities. Despite macroeconomic challenges, private equity (PE) firms are capitalizing on innovation, carve-outs, and emerging markets to drive returns.

Here’s a breakdown of the key trends shaping healthcare private equity this year:

Healthcare Private Equity Market 2024: Year in Review and Outlook

2024 was a strong but selective year for healthcare PE, with biopharma and healthcare IT leading growth while traditional provider deals lagged. Looking ahead, mid-market innovation, carve-outs, and Asia-Pacific diversification will be critical for success.

For investors:

Focus on sector specialization, operational value creation, and early due diligence to navigate this evolving market.

1. 2024: A Strong Year for Healthcare PE Despite Macro Challenges

Record-Breaking Deal Activity

• Global healthcare PE deal value reached $115 billion, making it the second-highest year on record (just below the 2021 peak).
• Megadeals dominated, with five transactions exceeding $5 billion (compared to just two in 2023).
  • Notable deals:
    • Novo Holdings’ $16.5B acquisition of Catalent (to boost GLP-1 manufacturing).
    • Sanofi’s $17.3B carve-out of its consumer health business (Opella).
• North America remained the largest market (65% of deal value), followed by Europe (22%) and Asia-Pacific (12%).

Regional Highlights

• North America & Europe surged, offsetting a 49% decline in Asia-Pacific deal volume (mainly due to China’s slowdown).
• Europe saw record-high deal volume, surpassing its 2021 peak, led by biopharma and medtech.

2. Sector Breakdown: Biopharma & Healthcare IT Lead, Provider Struggles

Biopharma & Life Sciences (43% of Deal Value)

• Key drivers:
  • Clinical trial IT infrastructure (e.g., GI Partners’ investment in eClinical Solutions).
  • Manufacturing expansion (e.g., Catalent acquisition for GLP-1 drug production).
• Challenges:
  • Bid-ask spread issues (sellers’ high price expectations vs. buyers’ caution).
  • Declining biotech VC funding (impacting R&D spending).

Healthcare IT Rebounds

• Deal activity rebounded after a 2023 slump, driven by:
  • Providers’ need for efficiency (e.g., TPG’s acquisition of Surescripts).
  • Payers investing in advanced analytics (e.g., Cotiviti’s $11B recapitalization).
  • Biopharma’s push for digital trial optimization (e.g., EQT’s acquisition of CluePoints).
• Generative AI is a growing focus, but few pure AI deals have materialized yet.

Provider Sector Hits a Decade Low

• Share of deal value fell to its lowest in 10 years, particularly in Asia-Pacific.
• Europe’s provider deals were limited due to regulatory fragmentation and operational complexity.

3. Key Trends Reshaping the Market

1. Mid-Market Funds Outperform

• Smaller funds ($500M–$4B AUM) delivered higher returns than large-cap peers.
• Shift from traditional provider deals to healthcare IT & biopharma services.

2. Carve-Outs Gain Traction

• Public companies divested non-core assets to streamline operations (e.g., Sanofi’s Opella sale).
• PE firms see carve-outs as high-value opportunities, with IRRs ~20% higher than typical buyouts.

3. Exit Challenges Persist

• Exit volumes dropped 41% from 2021 peaks due to:
  • High interest rates reducing multiple expansion.
  • Bid-ask misalignment (sellers want 2021 valuations; buyers are cautious).
• Sellers must now prove value creation with data-backed equity stories.

4. Asia-Pacific’s Shifting Landscape

• China’s slowdown redirected investments to India, Japan, and South Korea.
• India emerged as the largest market by volume (26% of Asia-Pacific deals), driven by hospital chains and CDMOs.

4. Outlook for 2025 & Beyond

Opportunities

• Biopharma rebound if biotech funding improves.
• More carve-outs as corporates continue portfolio optimization.
• Healthcare IT & AI adoption accelerating across payers, providers, and life sciences.

Risks

• Macroeconomic uncertainty (interest rates, inflation).
• Regulatory changes (e.g., US election impact on healthcare policy).
• Sponsor-to-sponsor deal recovery remains slow.

Why Mid-Market Healthcare Private Equity Firms Are Outperforming

Mid-market healthcare PE firms thrive by:
✅ Pivoting to resilient sub-sectors (IT, services, biopharma).
✅ Combining sector expertise with operational rigor.
✅ Adapting value-creation strategies beyond simple add-ons.

For Investors: Allocate to mid-market funds for higher returns and downside protection in volatile markets.

For GPs: Double down on differentiated expertise and pre-deal value planning to sustain outperformance.

1. Mid-Market Funds Outperform Large-Cap Peers

Stronger Returns & Consistent Deal Activity

• Top-quartile mid-market healthcare funds significantly outperformed large-cap funds.
• Deal volume remained steady despite broader market slowdowns (e.g., Webster Equity Partners’ successful exit from Retina Consultants of America).
• Fundraising surged by ~40% from 2019–21 to 2022–24, reaching $59B, signaling strong LP confidence.

Key Takeaway: Mid-market firms combine agility, sector expertise, and innovative strategies to generate higher returns.

2. Shifting Investment Focus: From Providers to Derivatives & Biopharma

Decline in Traditional Provider Deals

• Historically, 55% of mid-market deals targeted providers (e.g., physician groups, hospitals).
• Post-2022, provider deals dropped due to labor shortages, reimbursement pressures, and operational challenges.

Rise of “Derivative” Investments

Mid-market firms pivoted to high-growth adjacencies, including:

• Healthcare IT: Revenue cycle management (RCM), patient engagement platforms (e.g., Altaris’ acquisition of Sharecare).
• Provider Services: Staffing (e.g., Knox Lane’s buyout of All Star Healthcare Solutions), lab services, supply chain tech.
• Biopharma & Medtech: Contract research organizations (CROs), compliance/testing tools, clinical trial IT (e.g., WindRose’s acquisition of SubjectWell).

Why It Worked: These segments offer recession-resistant cash flows and address pressing industry pain points (e.g., hospital cost pressures).

3. Biopharma & Medtech: A Growing Opportunity

Niche Expertise Drives Deals

• Mid-market firms avoided bid-ask spread issues by targeting founder-owned businesses and specialized assets.
• Investments shifted from pure biopharma products to enabling services:
  • Clinical trial IT (e.g., GI Partners’ acquisition of eClinical Solutions).
  • Commercialization support (e.g., CDMOs, regulatory compliance tools).

Data Point: By 2024, IT and services made up 61% of mid-market biopharma deals, up from 47% in 2018.

4. Evolving Value-Creation Strategies

Moving Beyond “Buy-and-Build“

While tuck-in acquisitions still matter, mid-market firms now emphasize:

1. Operational Synergies
   • Centralizing back-office functions (e.g., billing, procurement) for physician practices.
   • Expanding ancillary services (e.g., ambulatory surgery centers for cardiology groups).
2. Tech & AI Integration
   • Deploying generative AI to reduce “tech debt” in healthcare IT platforms.
3. Value-Based Care (VBC) Pilots
   • Experimenting with risk-sharing models, though success varies by specialty.

Sector-Specific Playbooks

• CROs/CDMOs: Added new capabilities (e.g., advanced materials, injection molding).
• Healthcare IT: Scaled product suites (e.g., adding analytics to RCM platforms).

5. Future Challenges & Competitive Edges

Risks Ahead

• Macro pressures (higher interest rates, LP liquidity demands).
• Increased competition as more funds target niche healthcare segments.

How Mid-Market Firms Can Stay Ahead

1. Deepen Sector Expertise
   • Hire specialists (e.g., clinicians, regulatory experts) for biopharma/medtech deals.
2. Prioritize Pre-Exit Value Creation
   • Document EBITDA growth levers early to justify valuations.
3. Leverage AI & Data
   • Use predictive analytics to identify untapped synergies in portfolio companies.

Carve-Outs in Healthcare Private Equity: Unlocking Value in a Competitive Market

• 2025 deal flow will remain strong as corporates continue portfolio pruning.
• Asia-Pacific carve-outs rising: Multinationals spin off local units (e.g., UCB Pharma’s China divestiture).

Investor Takeaways

✅ Target corporate sellers with “non-core” labels – these often have untapped potential.
✅ Budget 20–30% more for separation costs than traditional buyouts.
✅ Pre-negotiate TSAs to minimize post-close operational friction.

1. The Rise of Healthcare Carve-Outs

Market Dynamics Driving Growth

• 17% CAGR in carve-outs since 2010, with a notable rebound in 2024 after a 2023 dip.
• Declining sponsor-to-sponsor deals (-30% since 2022) pushed PE firms toward corporate divestitures.
• Public companies under pressure to streamline operations and boost shareholder returns.

Key Drivers:

• Strategic refocusing: Large healthcare corporates (e.g., Sanofi, Baxter) divested non-core assets to improve growth metrics.
• PE appetite for undervalued assets: Carve-outs often come with built-in operational upside.

2. Why Carve-Outs Deliver Superior Returns

Performance Benchmarks

• Top-quartile carve-outs generate ~20% higher IRR than traditional buyouts.
• Value creation levers:
  • Revenue growth (62% of value): Removing “corporate drag” unlocks commercial potential.
  • Multiple expansion (30%): Standalone entities command higher valuations.

Case Studies: Successful Carve-Outs

1. KKR’s IVIRMA Global + Eugin Group (Fresenius SE)
   • Fertility sector consolidation: Combined entity created a global leader in IVF.
   • Synergies: Centralized R&D and expanded into new markets.
2. Carlyle’s Vantive (Baxter Kidney Care Unit)
   • Shift to peritoneal dialysis: Carlyle’s expertise accelerated digital transformation.
   • Debt reduction for Baxter: Freed capital for core business reinvestment.

3. The Carve-Out Advantage for Sellers & Buyers

For Corporate Sellers

• TSR boost: Revenue growth drives 7–9x more shareholder value than margin improvements in medtech/pharma (see Figure 4).
• Portfolio rationalization: Sanofi’s $17.3B Opella divestiture allowed focus on innovative drugs.

For PE Buyers

• Hidden value potential: Carved-out units often suffer from:
  • Underinvestment (e.g., outdated sales territories).
  • Complexity (e.g., bloated SKUs, shared resource inefficiencies).
• Control premiums: Unlike minority stakes, full ownership enables rapid transformation.

4. Execution Challenges & Mitigation Strategies

Unique Complexities

• Day 1 readiness: Transitional service agreements (TSAs) delay operational control.
• Information asymmetry: Sellers know more about the asset than buyers.
• Talent retention risks: Key employees may flee during separation.

Bain’s 4-Point Playbook for Success

1. Integrated Diligence
   • Commercial + operational due diligence combined.
   • Example: Map all shared services (IT, HR) to avoid post-close surprises.
2. Separation Management Office (SMO)
   • Dedicated team to oversee:
     • IT systems migration (e.g., ERP separation).
     • Customer/supplier contract transfers.
3. Talent Retention Plans
   • Retention bonuses for critical staff.
   • Fast-track leadership appointments.
4. 100-Day Value-Creation Roadmap
   • Quick wins: SKU rationalization, salesforce redesign.
   • Long-term bets: Digital transformation (e.g., AI in medtech manufacturing).

5. Sector-Specific Opportunities

Biopharma/Medtech

• Equipment manufacturers: Ardian’s acquisition of Masco Group (biopharma water systems).
• CDMOs: Onshoring tailwinds in Europe.

Provider & Healthcare IT

• Revenue cycle management: CD&R’s purchase of R1 RCM.
• Clinical trial IT: Arsenal Capital’s Endpoint Clinical buy.

Maximizing Exit Value in Healthcare Private Equity: A Strategic Imperative

Key Takeaways For Sellers

• Begin exit preparation 2+ years in advance
• Shift from “multiple storytelling” to provable value creation
• Address 3-5 key diligence risks before going to market

For Buyers

• Price in operational improvements during bidding
• Secure management continuity early
• Model multiple scenarios for interest rate impacts

For LPs

• Reward funds with strong EVM capabilities
• Pressure GPs on hold period discipline

1. The Current Exit Landscape: A Market in Stalemate

Alarming Decline in Exit Activity

• Exit volumes down 41% from 2021 peak (see Figure 1)
• Average hold times reached record highs in 2024 (see Figure 2)
• Sponsor-to-sponsor deals declined most sharply, while strategic acquisitions gained share

Root Causes of the Slowdown

1. Bid-Ask Spread Mismatch
   • Sellers anchored to 2021 valuation multiples
   • Buyers demanding discounts for higher financing costs
2. Macroeconomic Headwinds
   • Elevated interest rates (US 10-year at 4-5%) suppressing multiple expansion
   • Reduced biotech VC funding impacting biopharma exits
3. LP Liquidity Pressure
   • Aging portfolios creating urgency for distributions
   • $2.7T in unrealized PE value globally needing exit paths

2. The New Value Creation Imperative

The End of Multiple Expansion Reliance

• Historically, 46% of returns came from multiple expansion
• In current environment, operational improvements must drive 80%+ of returns

Four Pillars of Exit Value Maximization (EVM)

1. Proven Value Creation Track Record
   • Documented causal links between initiatives and EBITDA growth
   • Example: Healthcare IT firm showing 30% attach rate for new AI module
2. Articulated Future Runway
   • Clear 3-5 year plan with quantified upside
   • Example: Medtech platform outlining $50M synergy pipeline from tuck-ins
3. De-Risked Commercial Story
   • Customer case studies validating growth initiatives
   • Example: Payer analytics firm with 12-month pilot results from 3 major insurers
4. Operational Readiness
   • Clean data room with auditable performance metrics
   • Management team retention plan post-exit

3. The Seller’s Playbook: Preparing for Exit

12-24 Month Preparation Timeline

• Phase 1 (T-24 months): Conduct “reverse diligence” on asset performance
• Phase 2 (T-12 months): Develop equity story and address “deal killers”
• Phase 3 (T-6 months): Execute quick-win initiatives to demonstrate momentum

Critical EVM Tactics

• Commercial Due Diligence 2.0
  • Map customer concentration risks
  • Validate TAM expansion claims
• Operational Benchmarking
  • Compare metrics to public comps
  • Identify 100-300 bps of margin upside
• Talent Assessment
  • Retain key personnel with stay bonuses
  • Fill capability gaps pre-market

4. The Buyer’s Advantage: Value Creation Diligence

Pre-Close Preparation Framework

1. Day 1 Readiness Plan
   • Detailed 100-day roadmap
   • Dedicated integration team
2. Synergy Identification
   • Cost: Shared services consolidation
   • Revenue: Cross-selling opportunities
3. Technology Blueprint
   • IT separation costs
   • AI deployment roadmap

Competitive Differentiators

• Baked-in value creation can justify higher bids
• Early management alignment reduces post-close friction

5. Sector-Specific Considerations

Biopharma Services

• Highlight clinical trial backlog
• Demonstrate R&D productivity gains

Provider Platforms

• Show same-store growth metrics
• Document payor contract improvements

Healthcare IT

• Prove product roadmap viability
• Quantify customer retention rates

6. Looking Ahead: The Path to Exit Recovery

Cautious Optimism for 2025

• Fed rate cuts may ease financing pressures
• Bid-ask gaps narrowing as seller expectations adjust

Critical Watch Factors

• Biotech funding environment
• Election impacts on healthcare policy
• Asia-Pacific deal flow recovery

Asia-Pacific Healthcare Private Equity: Emerging Opportunities in a Shifting Landscape

1. Asia-Pacific Healthcare PE: Market Overview

Deal Activity in 2024

• Deal value grew at 21% CAGR since 2016, reaching $20B in 2024.
• Volume declined 49% YoY, primarily due to:
  • China’s slowdown (44% drop in deal count).
  • Increased competition from strategic buyers (e.g., hospital chains, pharma consolidators).

Geographic Shifts

2. Country Deep Dives: Where Capital Is Flowing

India: The New Regional Leader

• Largest market by volume (26% share), resilient vs. APAC’s 49% decline.
• Top Sectors:
  • Providers: Hospital chains (e.g., Blackstone’s Care Hospitals), clinics.
  • Biopharma: CDMOs, generics (e.g., Advent’s $1.6B exit of BSV Group).
• Exit Multiples: Strong IPO/strategic sale activity (e.g., KKR’s $839M Healthium deal).

Japan: Aging Population Fuels Growth

• Key Trends:
  • Senior care demand: 30% of population >65 years old (e.g., J-STAR’s Caregiver Japan buyout).
  • Biopharma innovation: Partnerships with conglomerates (e.g., Takeda spin-offs).
• Governance Reforms: “Market checks” now required for M&A, creating carve-out opportunities.

South Korea: Medtech Hotspot

• Deal value surged to 26% of APAC total (vs. 18% in 2023).
• Notable Deals:
  • Aesthetic devices: Archimed’s take-private of Jeisys Medical.
  • Pharma distribution: MBK Partners’ acquisition of Geo-Young.

China: Strategic Carve-Outs Dominate

• Multinational exits: UCB Pharma’s neurology divestiture to Mubadala/CBC Group.
• Domestic focus: Local players consolidating hospitals and CROs.

3. Sector Trends: Where Investors Are Placing Bets

Biopharma & Related Services (40% of Deals)

• India: CDMOs/generics scaling for global markets.
• Japan: Pharma outsourcing (e.g., preclinical R&D firms).

Providers & Clinics (35% of Deals)

• India: Multi-specialty hospitals, digital health (e.g., Apollo 24/7).
• Australia: Aged care infrastructure assets coming to market.

Medtech (25% of Deals)

• South Korea: Aesthetic/dental devices with global demand.
• Japan: Robotics for senior care.

4. Future Outlook: Risks & Opportunities

Growth Catalysts

• India’s healthcare spend projected to grow 12% annually through 2028.
• Japan’s corporate reforms unlocking more PE-friendly deals.
• South Korea’s medtech export boom attracting global buyers.

Key Risks

• China’s economic recovery: Slower rebound could prolong capital reallocation.
• Regulatory hurdles: Foreign investment rules in sensitive sectors (e.g., Indian hospitals).

Investor Takeaways

✅ Diversify beyond China into India/Japan/South Korea.
✅ Target carve-outs of multinational subsidiaries.
✅ Focus on export-ready medtech in South Korea.

🔗 Links for More:

Download and read the full report on Bain website or from NeoForm LinkedIn page.

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🔗 Related Readings:

• McKinsey Global Private Markets Report 2025
• Global Private Markets Report 2025: Private Equity Emerging from the Fog
• Private Equity Market Trends in 2025: A Year of Recovery and Strategic Shifts
• The Future of Investing: Private Markets and Credit in 2025