Healthcare buyouts in Asia-Pacific hit a record $3.2 billion in 2013, up 45 percent from the previous year, according to a report on private equity investment in healthcare by Bain & Co.
Kohlberg Kravis Roberts’ $1.7 billion carveout of Panasonic’s healthcare division accounted for roughly half the total. Another significant deal last year was Archer Capital’s $279 million acquisition of Lend Lease Group’s aged care unit in Australia.
However, the number of buyout deals hit a record 50 compared to 29 the previous year, the report showed.
“While the number of buyout deals grew at a compound annual rate of 5 percent in North America and 3 percent in Europe over the last five years, it has grown by more than 45 percent in the Asia-Pacifi c region and the rest of the world,” the report said.
Beyond buyouts, there was an additional $500 million invested in the sector in Asia-Pacific through PIPE deals.
China and India together accounted for about half of all buyout deal volume. “Investors continue to see opportunity for the private sector to help address the many unmet healthcare needs in these countries, which today have insufficient infrastructure to support aging populations, rising incidences of disease and a general need for more affordable healthcare,” the report said.
Last month, China announced key reforms of its medical sector, which could drive healthcare deal volume.
The government will work to establish a universal medical insurance system, speed up reform in public hospitals, and relax market entry requirements for the private sector to build health institutions in an orderly manner, according to a government statement reported in the People’s Daily.
China also intends to raise the percentage of shares that foreigners may own in medical joint ventures.
Bain sees a trend of smaller healthcare deals continuing. Corporate carveout opportunities will also arise, but they present specific challenges. “These assets have rarely been the focus of management’s attention and have room for improvement in a number of areas, so success often requires a multi-year transformation journey,” the report said.