The healthcare sector is no stranger to the demands of its patrons, but neither is the private equity industry. Be it patients waiting to be reviewed by medical professionals or LPs expecting to reap the rewards of a well-placed investment, pressure is endemic.

Private Equity International’s latest Healthcare special report examines the ways in which healthcare – and its investors – have been forced to adapt during the pandemic, as lockdowns restricted face-to-face consultations and the pharmaceutical industry rushed to find a vaccine.

Fund managers have found plenty of opportunity in this shake up. Private equity investment in the sector more than doubled to a record $151 billion last year, with deal volume also rising 36 percent to 515, according to Bain & Co’s latest Global Healthcare Private Equity and M&A Report. That hefty total was driven by a record 30 transactions valued at more than $1 billion.

PEI data, meanwhile, reveals that some $12.7 billion was raised last year for life sciences, more than double the amount gathered in 2020. Dedicated life sciences firms with strong AUM growth have also become prime targets for larger GPs recently.

The reasons behind such a flurry of healthcare activity are myriad, yet largely point to a single factor: that such concentrated demand for medical care – and in such a short period of time – has elevated the healthcare sector’s adoption of technology from being a nice-to-have, to a must-have.

Managers looking for opportunities in healthcare may be well-placed to back companies engaged in the nascent digitalisation of the sector – both for the benefit of patients and their own LPs. It is the mega-trends underpinning growth in both healthcare and technology that are attracting investors, with each considered attractive non-cyclical bets at a time of increased macroeconomic uncertainty.

That is not to say that GPs will have unlimited opportunities in healthcare. An uptick in investor interest has inevitably led to increased competition, particularly for investments that can benefit from the adoption of the latest technology, with managers vying to snap up assets while the sector remains hot.

As Eric Liu, co-head of the global healthcare sector team and head of the North American private equity team at EQT, noted in our report: there are not enough targets to go around. “The nature of competition in healthcare is different from in the TMT sector, which is also highly specialised and competitive,” Liu said. “There is an asset scarcity dynamic that drives PE buyer behaviour in the healthcare sector that does not exist in the same way in other sectors.”

With demand for healthcare unlikely to abate any time soon, the sector will remain competitive. Firms and investment professionals able to demonstrate an understanding of the potential interplay between tech and healthcare may find themselves positioned not only to identify compelling opportunities earlier, but also to create value in those investments with greater success.