Private equity healthcare sales lift M&As

economic growth

Private equity in the healthcare sector has accounted for nearly 20 per cent of the merger and acquisition activity in the last financial year in Australia, with a specific focus on health stocks.


A report from the law firm MinterEllison has shown that private equity (PE) investment soared from a meagre 4 per cent of all merger and acquisition activity in financial year 2015 to 20 per cent in the last fiscal year.


Specifically, there has been a large number of exits by the private equity owners, with many taking place through sales to other businesses or investors rather than through a public share float.


The report found that there were 46 private equity exits in fiscal year 2016, worth an average of USD 393 million, and with the PE owners usually having held the firms for around five-and-a-half-years.


The healthcare sector has been an important growth area, with MinterEllison private equity partner Ricky Casali pointing to the USD 1.7 billion sale of radiation treatment firm Genesis Care by KKR to Macquarie/China Resources and the USD 938 million sale of private hospital operator Healthe Care by Archer Capital to China’s Luye Medical Group.


PE activity in the healthcare segment increased considerably in the past financial year. PE was also very active on exits in this sector, mostly to the Chinese buyers. There was also an interest in the technology firms, particularly health-related ones, with Affinity Equity Partners purchasing the MedicalDirector software business from Primary Health Care for USD 155 million. The report predicts that the other service businesses will be attractive for buyers, especially experiential ones such as tourism, hospitality, fitness and wellness.


 MinterEllison private equity partner Ricky Casali observed that the Australian dollar remained lower compared to many other major currencies, making Australian assets attractive to foreign acquirers. Also, an entry of foreign buyers (mainly from China) was resulting in better competition in specific sectors and asset types (particularly health), and this in turn is leading to a surge in the asset prices for the domestic purchasers.