This article was originally published on Forbes.com.

The allure of the healthcare sector for private equity investors continues to grow. Many of the sector’s dynamics—rampant fragmentation, accelerating pressure to reduce costs, new purchasing patterns and robust exit channels—make it a perfect fit for classic private equity strengths. One sign of that appeal: private equity firms nearly doubled their investments in healthcare-related assets last year to nearly $30 billion.

However, high demand leads to high valuations, a particular challenge for price-conscious private equity firms. Corporate buyers stoked this demand, boosting their M&A spending in healthcare to a record amount of nearly $380 billion in 2014. While some of the corporate megadeals were out of reach of private equity firms, corporate buyers also continued to be highly active in the $500 million to $5 billion range that is desirable to private equity. One example: Over the past decade, corporate buyers made an average of 50 acquisitions per year in that range; in 2014, they completed more than 60 deals in it.

One strategy that private equity firms are using to execute good deals in this highly competitive environment is to pursue category leadership; building scale in their assets with depth rather than breadth. Recent Bain research documents the success of this approach. Looking at the biopharma and medtech segments, our analysis found that the most profitable companies in each were not the largest and that overall size did not result in superior performance. Instead, the top performers were those companies that had established strong leadership positions in the categories in which they play. That’s because category leaders tend to enjoy deeper customer insights, better commercial strength and superior access to new acquisition candidates. The power of category leadership is so strong that it trumps market attractiveness—meaning there are more outperformers among the leaders in markets with weak fundamentals than among the followers in strong markets.

Private equity firms can follow a number of avenues to achieve category leadership. Many healthcare segments are still extremely fragmented, playing to classic private equity strengths around buy-and-build strategies. Population health management is one example. Assets in this segment operate in a broad and still-to-be-defined space and encompass a wide range of products and services from data analytics to in-the-trenches care delivery. No winning model has yet emerged; however, some funds are placing bets on assets and management teams, confident they can adjust their models as the market evolves.

For firms looking for larger deal sizes, corporate carve-outs represent an attractive avenue through which they can play category leadership in two ways. First, they can use it to find likely carve-out candidates by analyzing the business portfolio of large corporations. Are there low-market-share businesses in the portfolio? Are there high-market-share assets that are small in the context of the overall portfolio? In either of these cases, a corporate parent could see benefits by carving them out into a standalone company—and private equity buyers can bring their expertise in “standing up” new companies. Second, once they own a carved-out asset, private equity buyers can pursue traditional category leadership strategies, building upon the asset’s existing strengths and/or finding another corporate buyer who can use the asset to bolster its own leadership position.

Healthcare will continue to be an important sector for private equity investors. Conditions are likely to stay competitive as many private equity firms look to deploy capital in the space and corporate M&A remains active in the deal sizes of interest to private equity. For investors, then, gaining advantage will hinge on identifying solid assets with a path to leadership, having a clear plan to create value in the assets post-close and finding creative ways to turn corporate buyers into partners rather than foes.

Written by Nirad Jain, Kara Murphy and Joshua Weisbrod, who are partners in Bain & Company’s Healthcare and Private Equity practices.