Market Insights Brief:
Private equity dealmaking in healthcare services fell again in the second quarter, but the market is likely poised for a turnaround, according to a report published this week by PitchBook.
An estimated 142 deals were announced or closed during the period, down 16.5% from the first quarter, the market research firm found.
But investment began to accelerate in the second quarter. Bankers have noted their acquisition pipelines are filling up, and sellers’ price expectations are beginning to decrease — signaling that a gradual increase in dealmaking could be coming.
Market Insights:
PE investment in healthcare services has declined over the past several quarters after firms poured more money into the space in 2021 and early 2022.
Last year, PitchBook tracked nearly 800 PE deals in the healthcare services sector — down from the more than 1,000 seen in 2021 — as firms pulled back amid high interest rates and heightened labor costs.
Private equity deals in healthcare services decline
Private equity deal count in healthcare services, 2017-2024
PE has also faced increased scrutiny from regulators and lawmakers, who argue the firms raise prices and reduce quality of care.
One study published last year found patients are more likely to experience adverse health events, like infections or falls, at PE-owned hospitals. Other research has linked PE ownership to higher costs for patients and payers.
Negative headlines about PE in healthcare may push large investors away from spending on providers, according to the PitchBook report. That’s impacted the number of deals involving physician practice management companies, which dragged deal count down in the second quarter.
Still, general partners at PE firms are facing increased pressure to deploy funds, the analysis found. Signs that the Federal Reserve would keep interest rates higher for longer meant firms began to consider pushing ahead with deals despite the lack of rate cuts.
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