What You Should Know:
– Healthcare Growth Partners (HGP) and Eliciting Insights surveyed private equity investment professionals focused on the Healthcare and Health IT sectors.
– The 2024 Health IT Private Equity Survey aimed to capture the “new normal” of the market, considering the current point in the interest rate cycle, economic fluctuations, and the upcoming U.S. presidential election. Respondents included venture capital, growth equity, and buyout investors, providing a comprehensive market overview.
Key Themes & Insights
- Valuations and Activity: Despite a general decline in valuations for new investments and exits in 2024, investment and exit activity has increased. Buyout and growth equity funds show resilience, while venture capital funds experienced more pronounced declines.
- Profitability vs. Growth: The shift toward profitability is seen as a return to discipline by buyout and growth equity investors. However, venture capital investors express concern that the market may overemphasize profitability over growth.
- Health IT Investing: There’s polarization in Health IT investing, with venture capitalists less optimistic, while growth equity and buyout investors experience increased activity. Buyout investors are particularly bullish on Health IT, noting higher valuations compared to the broader market.
- AI and Technology: AI is a significant focus across all fund types, primarily seen as a tool to enhance operations rather than drive new investments.
- Market Conditions: Most investors are unconcerned about the slowdown in the IPO market and rising interest rates, suggesting strength in private markets and alternative exit strategies.
- Election Sentiment: The majority believe a Trump presidency would benefit private equity and healthcare investing more than a Harris presidency.
Additional Observations
- The survey highlighted some surprising trends, including the resilience of growth equity, which seems to be recovering more in line with buyout funds than venture capital.
- Structured deals are becoming more common, particularly among growth equity investors, indicating a buyer-favorable market.
- Despite rising interest rates, most investors have minimal concerns about the debt burden of their portfolio companies, likely due to conservative debt practices.
- Investors hold mixed but largely neutral views on the impact of remote work, with some noting benefits like increased productivity and access to talent but also challenges in maintaining company culture.
While some uncertainty exists, particularly within the venture capital segment, the overall sentiment indicates a degree of resilience and adaptation to the “new normal.” The survey underscores the dynamic nature of the market, highlighting areas of stability, growth, and cautious optimism as the industry navigates economic changes and the integration of technologies like AI.
