240+ leading individuals in healthcare, life sciences and private equity gathered at The Langham Hotel in central London for HPE Europe 2023 for a day packed with fireside chats, in-depth plenary sessions and an abundance of networking opportunities. We’ve distilled the key findings around investment trends, market challenges, innovative advancements, financing dynamics and forecasts for 2024.

IN DEPTH

INVESTING IN THE FUTURE OF HEALTHCARE

Healthcare private equity professionals remain bullish about the outlook for transactions going forward, despite a slow year for deals. We have seen more and more specialist investors emerging in Europe over the past decade and institutional investors are increasingly keen to back managers that recognise that healthcare is heterogenous and its many sub-sectors all come with their own complexities, headwinds and drivers.

1. We are entering a golden age of innovation in healthcare, with many new drugs being discovered and advances in cell and gene therapies building on significant learnings gained during the pandemic. Further, the fast-moving integration between drug development and diagnostics is contributing to a major step-change in how things are being done.
2. Some of the sub-sectors that are currently in focus for healthcare investors in Europe include pharma services, medtech, personalized medicine, generics and specialty pharma, with a particular appetite for assets embracing the use of data science and artificial intelligence.
3. The tide is turning for healthcare deals, with opportunities being created in Europe by regulatory and political change, technology adoption that is now more tangible than ever, and the need to address pinch points in value chains.

CLOSING DEALS IN THE CURRENT MARKET

Despite strong views on the medium to longer term, much of the discussion at HPE Europe centred around the challenges that currently stand in the way of deals getting done, and how those might be overcome.

1. After a challenging period for dealmakers, we are now seeing a bifurcation of deal activity. There is a big disparity in appetite between Tier A and Tier B assets, with the financing and demand there for premium companies but not necessarily for others.
2. The tight M&A environment and depressed public markets are driving innovation in deal structures, with more take-privates, club deals, minority deals and continuation funds. We expect these themes to continue as the deal landscape improves, with further use of structuring to close the gap between buyer and seller pricing expectations.
3. Value creation strategies focused on embracing technology to drive efficiencies and geographic expansion to diversify risk across markets are a focus for investors. When it comes to exits, there is a shift in the buyer landscape in favour of strategics.

CHALLENGES AND OPPORTUNITIES IN THE FINANCING MARKETS

Another big focus for healthcare investors today is clearly the changing dynamics in the financing markets, where the era of cheap debt is undoubtedly over and access to finance providers is much more limited than it is has been in recent years. Panellists felt the uncertainty was highlighting the paramount importance of strong relationships with lenders, who themselves are now much more focused on risk than they are on absolute returns.

1. Challenges and Opportunities in the Financing Markets
2. Another big focus for healthcare investors today is clearly the changing dynamics in the financing markets, where the era of cheap debt is undoubtedly over and access to finance providers is much more limited than it is has been in recent years. Panellists felt the uncertainty was highlighting the paramount importance of strong relationships with lenders, who themselves are now much more focused on risk than they are on absolute returns.

PREDICTIONS FOR 2024

Many of the speakers and delegates present at HPE Europe were asked to look into their crystal balls and predict what the next 12 to 18 months might have in store. For most, the expectation was of a busy year for healthcare deals in 2024, thanks in part to pent up demand from both buyers and sellers, as well as significant dry powder sitting on the sidelines and keen to transact.

The healthcare private equity deal markets in Europe may not immediately return to the heady levels of 2021, but many in the industry feel there is plenty more investment activity to look forward to in the year ahead.