Early in June, the Wall Street Journal published an article examining private equity (PE) activity in the healthcare M&A market, which the LevinPro HC team exclusively covers.
Overall, we agree with the sentiment and conclusions in the article: PE investment activity is down this year compared to 2023, both due to increased regulatory scrutiny and higher interest rates, the latter holding most of the blame.
However, the article relied on M&A transaction data from Pitchbook, and some of the numbers left us scratching our heads, so we wanted to investigate ourselves.
According to Pitchbook (as cited in the article), there were 180 PE add-on deals through May 28, or when a PE firm buys a company through a portfolio company.
Our numbers are higher: we have 193 deals from a PE-backed company (255 if you include direct PE investments). Although on face value, that’s not a dramatic difference, it’s important to note the difference in the methodology between Pitchbook and LevinPro HC.
Pitchbook, for example, includes Veterinary and Skilled Nursing in its healthcare numbers, which might bolster its overall count. We’re not convinced Veterinary belongs in the same M&A counts as areas such as Physician Medical Groups or Home Health & Hospice, but our sibling platform, LevinPro LTC, does include Skilled Nursing in its data (PE is not super interested in Skilled Nursing anyway, despite what regulators have said). We track 12 healthcare sectors, from Hospitals to Behavioral Health Care to Rehabilitation and beyond.
We don’t have access to the specific numbers by sector that the WSJ cited, but we decided to explore Pitchbook’s Q1:24 Healthcare Services Report to see how our numbers stack up. Pitchbook found that there were 101 PE deals (99 excluding Vet and Skilled Nursing) in Q1:24, 62 of which were add-on acquisitions. According to data captured in our database, we tracked 149 PE deals, of which 111 were add-on acquisitions, in the first quarter of 2024.
Although the WSJ and Pitchbook are correct that PE activity is down, it’s historically still very high, and that context is important to consider. In Q1:19, for example, there were 96 PE deals. Want to guess how many there were in Q1:14? 17. Even if numbers fluctuate, PE remains very bullish on the healthcare market and will remain a significant presence in the industry.
