Bain finds that margin expansion “has not been a meaningful contributor to investor returns” for European PE health care investors over the past decade in its recentlyreleased report, ‘Global Healthcare Private Equity and M&A Report 2023’.

In an analysis of 134 European health care PE deals between 2010 to 2021 profit margin growth accounted for only 3% of PE’s return on investment. Most of the value created came from revenue growth, which accounted for 54% of the return on investment, and the remaining 43% came from multiple expansion. Whilst only around half of the 134 deals 2/4 were in health care services (the analysis covered all areas of health care including pharma and medtech), Bain says that the returns made in Europe’s retail health sector in particular have been driven by revenue growth, achieved primarily through the “proven way” of doing this: roll-up acquisitions.

Patrick Biecheler, partner at Bain and one of the authors of the report, is keen to emphasise to HBI that this is not to PE’s discredit: “We are not suggesting PE firms are not as good at boosting productivity as they claim. We are emphasising the fact that, given the current economic context is making health care business more challenging at times (inflationary, cost constrained health care environment, with talent shortage across almost the whole value chain), ‘simple’ solutions such as consolidating players are no longer sufficient to sustain profitability and growth, and shall take a bit longer to materialise than the usual three-to-five years that may drive an investment.”