This year should produce further robust deal activity in global healthcare, but acquisition multiples may come down to finance the higher cost of debt, according to Bain & Company partner Nirad Jain.
Jain, who co-authored the firm’s Global Healthcare Report, thinks a reduction in multiples “may not be a terrible thing” as multiples have been rising slowly over the past few years, propelled partly by cheap financing.
But with the cost of debt now rising, he told Private Healthcare Investor: “For a lot of investors [an acquisition multiple of] 10x is the new 8, [and] 12 is the new 10, so there is likely to be some pressure there.
“But fundamentally, private equity will still play a role in this market because of the massive changes occurring in the sector. Disruption is good for private equity as long as you identify the opportunity and make sure you are on the right side of that change.”
In 2014 global corporate healthcare activity was worth $380 billion, with private equity deal activity just shy of $30 billion, Jain said.
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