Private equity investors rank healthcare companies their top choice for deal activity in the next 12 months, says a new survey by accountants and business advisors, Grant Thornton.
When asked to select the top three sectors they would be most active in over the next 12 months, 50% of respondents from private equity firms pointed to healthcare, according to the Private Equity Barometer, a quarterly survey of more than 100 private equity executives. In addition, 52% of private equity firms cited healthcare as the sector they had been most active in during the previous 12 months.
In terms of what respondents are prepared to pay, healthcare is ranked the joint highest sector alongside media and communications, in relation to earnings. Respondents anticipate having to pay an 8 times EBITDA* multiple for the deals in their sector over the next 12 months, the same multiple anticipated for transactions in the media and communications sector.
Grant Thornton manages Yorkshire Forward’s Investing in Health programme which supports healthcare companies seeking finance. Lisa Ward, manager of the programme, says: "Despite looming public sector cuts that will impact demand for good and services from the private sector, private equity companies remain unwaveringly confident about healthcare deal activity.
"With one of the highest expectations of EBITDA multiples when compared to other sectors, private equity firms are playing it safe, as indicated by the 50% of respondents that are choosing healthcare as a favourite industry to invest in.
“Yorkshire healthcare companies are well placed to take advantage of the appetite for private equity deals. There are a number of truly innovative companies ripe for investment in the region and those that carry the minimum amount of risk offer a solid opportunity for investors,” Ward concluded.
* EBITDA = Earnings before Interest, Taxes, Depreciation, and Amortization.