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Bain & Co: Asia-Pacific healthcare PE buyouts doubled in 2017

Larger deals and cross-border ties-ups underscored $7.2bn worth of healthcare deals in the region.

Healthcare-focused buyouts in the Asia-Pacific region reached $7.2 billion in 2017, more than twice the level in 2016, as demographic and regulatory trends boosted deal activity in the sector.

The number of deals also rose year-on-year, from 52 deals worth $3.2 billion in 2016 to 61 deals totalling over $7 billion in 2017, according to Bain & Company’s Global Healthcare Private Equity and Corporate M&A Report 2018.

The report also noted the average size of healthcare private equity buyouts in the region increased by 50 percent, from nearly $80 million to close to $120 million.

In addition, cross-border activity flourished as Chinese investors expanded their outbound M&A focus from Australia to also include the US and Europe, the report noted. Two examples of such deals are Chinese firm Hillhouse Capital and US manager Clayton, Dubilier and Rice’s $800 million acquisition of New York-based Carestream Health’s digital dental business in April 2017, as well as the $740 million reported purchase of Sydney-based cancer care provider Icon Group by China’s Pagoda Investment, Goldman Sachs Principal Investment Area and the Queensland Investment Corporation in May last year.

As competition intensifies and deal sizes rise, Asia-Pacific funds are also forming more partnerships with other financial investors and with corporates, both at home and abroad.

Carlyle Asia and Australian buyout firm Pacific Equity Partners, for example, acquired iNova Pharmaceuticals $930 million in June, while a group of Chinese investors, including China Life Insurance and SDIC Fund Management picked up a stake in Shanghai United Imaging Healthcare, a leading Chinese medical equipment and IT solutions provider, for more than $500 million in September.

The hottest sectors were biopharma and medtech, which together comprised 64 percent of total deal value and 60 percent of overall deal count, with transactions in both developed and emerging Asia, the report found.

Bain expects private equity-backed healthcare deals in the region to remain robust in 2018, as demographic trends and the Chinese government’s measures to encourage the development of the country’s healthcare infrastructure as part of the ‘Healthy China 2030’ initiative are carried out.