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While the outlook for the coming year in global healthcare private equity shows promise, certain changes in the European market signal that companies will need to be more prepared than ever. Franz-Robert Klingan, a partner with Bain's Healthcare and Private Equity practices, discusses four things that companies can look out for to mitigate risks.
Read the Bain Report: 2019 Global Healthcare Private Equity and Corporate M&A Report
Read the transcript below.
FRANZ-ROBERT KLINGAN: 2018 has been a banner year for healthcare private equity all around the globe. That comes on the back of a couple of seminal trends that we all know and love healthcare for: recession-proof assets, but also increasing willingness to deal with the sector, build special capabilities, and therefore be able to deal with reimbursement and development risk.
In Europe, it's also been a very good year. We've seen $18 billion deployed. And that came on the back of a couple of large deals in biopharma, specifically in generics, in medtech and then in retail health, although the big buy-and-build activity in that sector has probably not even been noticed in those official figures.
If we think about what happens going forward in 2019 and beyond in Europe, I think we should expect a good flow of deals, good opportunities, and therefore the year 2019 is likely to come out at or above previous years.
But we need to be intensely aware that things in Europe are changing and that we need to, in an intensively competitive environment, bring the best to bear in order to win those deals.
Things that are changing in Europe include Brexit, medical device regulation and then some of the German pending reforms. And in order to deal with that, people need to come to the table immensely prepared. Specifically, we think there are four things that you need to look for.
First of all, in that preparation, be ready. You have to have your best foot forward for the large assets that are out there.
Secondly, in doing so, think about your value-creation plan. It needs to encompass all of the upsides that are possible, top and bottom line. And to get there, you need to have integrated diligence. So just sheer commercial market diligence is no longer enough. You need to bring the strategic, the operational and the commercial perspective into one to realize the full upside and make sure that they're fairly integrated.
And then, the last thing that you need to think about is be creative in your deal structures. That could include consortia. That could include public to private. That could be looking for niches that are so far not well traveled and give you further opportunities that few can access.
So, bottom line, we're set for a great year, but we have to be immensely prepared in order to capture the full value.
Europe: Robust Activity Despite Long-Term Uncertainty
Regulatory and political shifts, such as Brexit and pending German reforms, could actually create investment opportunities in the short term.
First published in April 2019