Several factors are causing a boom in private equity deals involving retail healthcare, in contrast to the overall downward trend of deal counts. Nirad Jain, a partner with Bain's Healthcare practice, shares the underlining reasons why retail healthcare is a huge opportunity for PE funds looking to deploy capital.
Read the Bain Brief: What's Behind the Surge in Retail Healthcare Deals?
Read the transcript below.
NIRAD JAIN: Private equity deal count is down 20% over the last three years. But there's one sector that's bucking that trend, and that's retail health. Retail health has been up 34% on a deal count basis over the last five years.
And there's a few things that are underlying that trend. One is patient demographics and cost management trends that's leading to, really, a surge in interest in the sector. And what you see about the sector is there's some really attractive economics. Retail health clinics can make 25% plus EBITDA margins.
And yet it's extremely fragmented, which means there's a real deal opportunity for investors where you can drive both organic growth and M&A driven growth. In order to do that, you have to show expertise in both retail and in health care. And on the latter, it's really important to think about how to manage those physicians and clinicians so they really feel like they're doing something more than just driving EBITDA growth.
Given that private equity is awash in capital and really interested in finding other ways to deploy it, we think that retail health is going to be a vibrant sector for many years to come.
Strong growth and high margins are attracting private equity and corporate investors.