We attended this year's Private Equity Chicago Forum, joining more than 300 industry leaders from LPs, GPs and advisory firms to explore opportunity in the global and U.S. private equity markets. Debbie Gersh also moderated a robust panel discussion on the health care sector. Here are five of our takeaways from the conference:
Health care investment opportunities
- Health care presents exciting opportunities for private equity and growth equity. The U.S. health care sector is 20% of the economy and presents opportunities for investors to find and fund health care innovation, new solutions to problems and resource constraints. In particular, investors noted that there is opportunity for PE investment in technological innovation, outsourced/back-end services for health care professionals, and labor.
- Investors are focused on improving quality of and access to care and reducing costs in the health care ecosystem. Investors noted the increased focus of regulators and others in recent years on patient outcomes and a heightened awareness of whether an investment results in positive outcomes for patients. This requires investors to use data to track their investment outcomes and invest responsibly.
- Difficulty in accessing and sharing data presents a roadblock for investors in health care. Investors pointed to the critical nature of data as a key part of healthcare investments, but noted the difficulty in accessing or sharing data so that it can be used in a productive way. Investors also noted that there is tremendous "AI hype" but, at this point, there are relatively few AI use cases in healthcare.
Private equity market insights
- Resilient assets are more appealing in volatile times. Investors are optimistic that interest rates will come down soon and that deal volume will increase in the second half of the year, but the current era of market volatility is not in the rear-view mirror quite yet. The most successful assets in unpredictable times are those that are consistent across market cycles, with durable demand, sustainable margins, strong free cash flow and a capital structure that can absorb shocks. Investors are looking to structure deals to benefit from a longer interval—over several market cycles if necessary.
- Assets will need to come to market. There is a lot of dry powder in private equity and a simultaneous slow down in new deals. While high-quality assets looking for an exit will be a magnet for investors as always, hold periods have been extended to a 15-year high, and there's pressure for exits to return capital to LPs. This means that less-than-perfect assets will also need to come to market, at lower valuations and less favorable deal terms for the seller.
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