Report

Covid-19 Fallout: Investing to Handle Pandemics Present and Future

Healthcare companies are responding to changes wrought by the coronavirus and gearing up to anticipate future outbreaks.

By Justin Doshi, Christian Langel, Nirad Jain, Kara Murphy, Franz-Robert Klingan, Dmitry Podpolny, and Vikram Kapur

First published on Μαρτίου 16, 2022
min read


At a Glance The pandemic roiled every healthcare sector, creating a strong concentration of investment opportunities in companies directly involved in detecting, containing, and treating the virus. Covid-19 also shifted customer preferences, upset supply chains, and prompted new regulation, catalyzing an explosion of investment in home and digital care, staffing solutions, and preparing for the next pandemic. With endemic Covid-19 looming in the future, companies that rebuild a new normal for healthcare will be rewarded. This article is part of Bain's 2022 Global Healthcare Private Equity and M&A Report Explore the report In a seemingly endless second year, the Covid-19 virus and its variants continued to roil healthcare systems globally. As governments, nonprofits, and for-profit companies marshaled their resources, the pandemic created new opportunities for investors in two broad categories: companies directly involved in detecting, containing, and treating the virus, and companies in other healthcare subsectors transformed by the pandemic. The first category mainly consists of companies in medtech, biopharma, and life sciences tools. Medtech companies that excel in supply chain resilience for essential medical supplies and equipment were the subject of major deals. Notably, Medline, which has leveraged its end-to-end control of the value chain to reliably deliver personal protective equipment to health systems, received investment from Blackstone, Carlyle, Hellman & Friedman, GIC, and ADIA in a deal valued at $34 billion. Pharma services companies that have accelerated Covid-19 therapeutic development also attracted large private investments. For example, EQT and Goldman Sachs acquired Parexel, a contract research organization, for $8.5 billion. Companies enabling widespread Covid-19 testing enjoyed a surge in investor interest. For instance, EQT purchased a majority stake in Cerba HealthCare, a French medical laboratory service company, from Partners Group for $5.3 billion. And Unilabs, a leading European diagnostic services provider, was acquired by A.P. Moller Holding from Apax Partners. Several growth-equity investments also flowed to companies developing Covid-19 therapeutics. For example, Abogen in China raised $700 million to advance its mRNA vaccine in a funding round led by Temasek. Revelation Therapeutics, a biotech company developing antivirals for respiratory infections, went public through a merger with Petra Acquisition. Because a prolonged endemic scenario would reinforce demand for many Covid-19-related assets, investment opportunities in this area look set to proliferate. Besides those companies directly involved in combating the pandemic, private equity investments also flowed to companies in other healthcare subsectors that experienced pandemic-catalyzed changes. The knock-on effects of Covid-19-induced restrictions and behavioral changes have shifted customer preferences, upset supply chains, and prompted new regulation or deregulation. In this regard, four areas dominated investment during 2021: alternative sites of care, mental health, staffing shortages at providers, and pandemic preparedness. Shifting care from hospital to home Covid-19 spurred regulatory changes, such as waivers for hospital-at-home care, and whetted an appetite among both consumers and providers for technology-enabled services, which accelerated adoption of alternative-sites-of-care models. That momentum, in turn, favored services and technologies to care for patients at home instead of a hospital. Wellspring acquired Caring Brands International, a franchiser of home health services in the US, UK, Ireland, and Australia. Amedisys also purchased Contessa Health, a home-based acute and postacute care provider. And US health systems Mayo Clinic and Kaiser Permanente invested $100 million in home-hospital service provider Medically Home. Although regulatory uncertainty about home-hospital and telehealth reimbursement persists in some markets, the shift toward alternative sites of care will likely continue. Less stigma about mental health treatment The pandemic has increased demand for behavioral health treatments and has strengthened employer commitment to supporting employee mental health. In the US and Europe, investors bought several brick-and-mortar mental health companies. Onex Partners completed its majority acquisition of Newport Healthcare, a US provider of behavioral health clinics focused on teens and young adults, for $1.3 billion. In Europe, Apax Partners acquired Mentaal Beter, a Dutch network of mental care clinics. Fueled by employer support for employees, growth-equity investment in US digital mental health companies surged. In October, for example, BetterUp raised $300 million through a Series E funding led by Wellington Management, following a $125 million Series D round in February. With the reduced stigma for mental health services, combined with greater employer and payer commitments, the addressable mental health market seems bound to expand over the next few years. Wanted: staffing to fill the gaps at providers Healthcare workers are leaving their jobs at higher rates as Covid-19 takes a toll on their mental and physical health, and other career opportunities look more attractive. This places increasing pressure on provider organizations, with many facing higher labor costs and unable to meet patient demand. Companies that help fill vacancies thus attracted new attention from investors in 2021. For example, Centerbridge and CDPQ jointly purchased Medical Solutions, a staffing firm focused on travel nursing, for $2.3 billion. Growth-equity firms also targeted this market with ConnectRN, which provides flexible shift offerings and career development resources for nurses, raising $76 million from investors led by Suvretta Capital Management and Avidity Partners. In the short run, staffing agencies will play a big role in closing personnel gaps exacerbated by Covid-19. A return to more normal staffing and turnover levels seems inevitable, so companies that manage to keep their employees engaged and loyal will get there faster. Over the longer term, it’s not clear which companies will succeed. Will big staffing firms such as Medical Solutions dominate, or will innovators such as Nomad Health, Trusted Health, and Wheel move ahead? Preparing for the next ones Covid-19 exposed the economic and social consequences of inadequate pandemic preparedness. As a result, even with the pandemic far from over, governments and private companies are already investing to prepare for future outbreaks. Many companies developing vaccine platforms (especially mRNA) and antimicrobials (antibiotics and antivirals) have seen a surge in government spending as well as venture funding. Big name mRNA firms, such as BioNTech and Moderna, multinational pharmaceuticals firms working on antiviral products, and associated pharma services companies will likely attract the most interest, but emerging firms with differentiated therapies, along with the “pick and shovel” companies serving various sectors, also stand to gain. * * * A year ago, anticipation of the vaccine gave rise to hope for eradicating Covid-19. Today, the future will more likely feature endemic coronaviruses, with widespread vaccination and effective antivirals progressively dampening the effects of each new variant. Select investments in technologies that further those goals will be rewarded in economic and social terms, as will investments that deliver high-quality care to all populations, including low-income and rural groups, to rebuild a new normal for healthcare. Read the Next Chapter Now Playing: The Return of the Healthcare Megadeal Read our 2022 Global Healthcare Private Equity and M&A Report Explore the full report Download the PDF

At a Glance

The pandemic roiled every healthcare sector, creating a strong concentration of investment opportunities in companies directly involved in detecting, containing, and treating the virus.
Covid-19 also shifted customer preferences, upset supply chains, and prompted new regulation, catalyzing an explosion of investment in home and digital care, staffing solutions, and preparing for the next pandemic.
With endemic Covid-19 looming in the future, companies that rebuild a new normal for healthcare will be rewarded.

In a seemingly endless second year, the Covid-19 virus and its variants continued to roil healthcare systems globally. As governments, nonprofits, and for-profit companies marshaled their resources, the pandemic created new opportunities for investors in two broad categories: companies directly involved in detecting, containing, and treating the virus, and companies in other healthcare subsectors transformed by the pandemic.

The first category mainly consists of companies in medtech, biopharma, and life sciences tools. Medtech companies that excel in supply chain resilience for essential medical supplies and equipment were the subject of major deals. Notably, Medline, which has leveraged its end-to-end control of the value chain to reliably deliver personal protective equipment to health systems, received investment from Blackstone, Carlyle, Hellman & Friedman, GIC, and ADIA in a deal valued at $34 billion.

Pharma services companies that have accelerated Covid-19 therapeutic development also attracted large private investments. For example, EQT and Goldman Sachs acquired Parexel, a contract research organization, for $8.5 billion.

Companies enabling widespread Covid-19 testing enjoyed a surge in investor interest. For instance, EQT purchased a majority stake in Cerba HealthCare, a French medical laboratory service company, from Partners Group for $5.3 billion. And Unilabs, a leading European diagnostic services provider, was acquired by A.P. Moller Holding from Apax Partners.

Several growth-equity investments also flowed to companies developing Covid-19 therapeutics. For example, Abogen in China raised $700 million to advance its mRNA vaccine in a funding round led by Temasek. Revelation Therapeutics, a biotech company developing antivirals for respiratory infections, went public through a merger with Petra Acquisition. Because a prolonged endemic scenario would reinforce demand for many Covid-19-related assets, investment opportunities in this area look set to proliferate.

Besides those companies directly involved in combating the pandemic, private equity investments also flowed to companies in other healthcare subsectors that experienced pandemic-catalyzed changes. The knock-on effects of Covid-19-induced restrictions and behavioral changes have shifted customer preferences, upset supply chains, and prompted new regulation or deregulation. In this regard, four areas dominated investment during 2021: alternative sites of care, mental health, staffing shortages at providers, and pandemic preparedness.

Shifting care from hospital to home

Covid-19 spurred regulatory changes, such as waivers for hospital-at-home care, and whetted an appetite among both consumers and providers for technology-enabled services, which accelerated adoption of alternative-sites-of-care models. That momentum, in turn, favored services and technologies to care for patients at home instead of a hospital. Wellspring acquired Caring Brands International, a franchiser of home health services in the US, UK, Ireland, and Australia. Amedisys also purchased Contessa Health, a home-based acute and postacute care provider. And US health systems Mayo Clinic and Kaiser Permanente invested $100 million in home-hospital service provider Medically Home. Although regulatory uncertainty about home-hospital and telehealth reimbursement persists in some markets, the shift toward alternative sites of care will likely continue.

Less stigma about mental health treatment

The pandemic has increased demand for behavioral health treatments and has strengthened employer commitment to supporting employee mental health. In the US and Europe, investors bought several brick-and-mortar mental health companies. Onex Partners completed its majority acquisition of Newport Healthcare, a US provider of behavioral health clinics focused on teens and young adults, for $1.3 billion. In Europe, Apax Partners acquired Mentaal Beter, a Dutch network of mental care clinics. Fueled by employer support for employees, growth-equity investment in US digital mental health companies surged. In October, for example, BetterUp raised $300 million through a Series E funding led by Wellington Management, following a $125 million Series D round in February. With the reduced stigma for mental health services, combined with greater employer and payer commitments, the addressable mental health market seems bound to expand over the next few years.

Wanted: staffing to fill the gaps at providers

Healthcare workers are leaving their jobs at higher rates as Covid-19 takes a toll on their mental and physical health, and other career opportunities look more attractive. This places increasing pressure on provider organizations, with many facing higher labor costs and unable to meet patient demand.

Companies that help fill vacancies thus attracted new attention from investors in 2021. For example, Centerbridge and CDPQ jointly purchased Medical Solutions, a staffing firm focused on travel nursing, for $2.3 billion. Growth-equity firms also targeted this market with ConnectRN, which provides flexible shift offerings and career development resources for nurses, raising $76 million from investors led by Suvretta Capital Management and Avidity Partners.

In the short run, staffing agencies will play a big role in closing personnel gaps exacerbated by Covid-19. A return to more normal staffing and turnover levels seems inevitable, so companies that manage to keep their employees engaged and loyal will get there faster. Over the longer term, it’s not clear which companies will succeed. Will big staffing firms such as Medical Solutions dominate, or will innovators such as Nomad Health, Trusted Health, and Wheel move ahead?

Preparing for the next ones

Covid-19 exposed the economic and social consequences of inadequate pandemic preparedness. As a result, even with the pandemic far from over, governments and private companies are already investing to prepare for future outbreaks. Many companies developing vaccine platforms (especially mRNA) and antimicrobials (antibiotics and antivirals) have seen a surge in government spending as well as venture funding. Big name mRNA firms, such as BioNTech and Moderna, multinational pharmaceuticals firms working on antiviral products, and associated pharma services companies will likely attract the most interest, but emerging firms with differentiated therapies, along with the “pick and shovel” companies serving various sectors, also stand to gain.

* * *

A year ago, anticipation of the vaccine gave rise to hope for eradicating Covid-19. Today, the future will more likely feature endemic coronaviruses, with widespread vaccination and effective antivirals progressively dampening the effects of each new variant. Select investments in technologies that further those goals will be rewarded in economic and social terms, as will investments that deliver high-quality care to all populations, including low-income and rural groups, to rebuild a new normal for healthcare.

Read the Next Chapter

Now Playing: The Return of the Healthcare Megadeal