During this breakout session, moderator Sharon Lamb, Partner at McDermott, was joined by Georg Ganghofer, Head of Investments at Brockhaus Capital; Christoph Brandenberger, Managing Director at Brown Gibbons Lang; Tiemo Grimm, Principal at Nordic Capital; André Seidel, Senior Investment Manager at Nord Holding, and Dr. Ulrich Wandschneider, Operating Partner & Senior Advisor at Trilantic Europe.
The first of the three key themes the panel discussed was the status of the life sciences and healthcare industries and opportunities for private equity firms on both sides of the Atlantic.
After the financial crisis in the late 2000s, US private equity firms focused on healthcare and life science have experienced strong growth.
Globally, private equity deals in healthcare in 2018 and 2019 have tracked at record levels. This was particularly true in the US where, in 2018, reported healthcare transactions increased to $63.8 billion (being approximately 60% of overall globally reported healthcare deals of $101 billion.)
These increased levels of investment come at times of increased political and socio-economic uncertainty, perhaps indicating that health services are considered a safe haven for investors, given the long term increased global health needs of patients.
The panel concurred that the decade of growth was mainly due to a long and strong wave of consolidation of the market, especially in healthcare services and pharma and life sciences. However, despite this activity, the European market still appears to be at the beginning of the investment wave and is ripe for consolidation due to fragmentation and differences in health systems across Europe. The key investment areas and activity have, so far, been in life sciences transactions, investment in healthcare providers and related activities.
The second theme the panel discussed was the value of private equity and the question of whether private equity is an appropriate investing vehicle in the healthcare sector. The panel noted that there can be reservations about private equity involvement in healthcare but considered that private equity brings strong value to healthcare and observed that negative views may be driven by a combination of misconceptions and poor communication about the value, investment and capital brought by private equity. Negative views may also be affected by perceptions that private equity investments are short term and solely profit driven. It was noted however that private equity brings much needed capital and investment, the investment horizon is typically longer than expected and there is clear alignment in successful investments between high quality healthcare and investor needs. In addition, activity and data show that under private control businesses may often develop more quickly and be better at innovation adoption than under public control.
Towards the end of the discussion, the participants of the panel looked at future “hot” investment areas and the topics that were likely to be considered current in 2025. The panel agreed that healthcare would continue to be an area of increased investment and that future growth areas would include digital health, data technologies, pharma and outsourced pharma services as well those industries focused on targeting healthcare likely to be affected by demographic change, including ageing and mental health.
McDermott Will & Emery