Questions about Healthcare M&A
Dear all,
I will be joining a BB's healthcare team this summer as an analyst and was wondering if anyone in the industry could outline the following:
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What resources, if any, did you use to prepare yourself for HC specific M&A?
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How does HC M&A differ from other industries in terms of valuation?
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What are the current trends and key drivers of this industry?
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What are the exit opps for a HC analyst?
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I understand the stronger banks in this field are JPM/GS/BARC for BBs and PJT/Centerview for EBs. Is this accurate?
I look forward to hearing your thoughts.
1) Look up sources like BioSpace, FiercePharma etc to familiarize yourself with what is happening in the market. These are comprehensive and free. Evaluate Pharma is a paid source that has a lot of information too but you don't need to spend this money 2) In terms of company valuations? For Big Pharma is can be similar to most companies but you have more components of intangible assets (IP and so on) whilst for small companies you're basing everything on future potential and will often be valuing pre-revenue companies 3) Gene therapies, companion diagnostics and inorganic growth are the large overarching themes of the industry currently. Perhaps a more specific question can help you more here 4) Healthcare PE is a big one but you can also go to healthcare-focused strategy roles (both in consulting and in corporates) as well as L/S funds 5) GS/JPM and MS are strong in HC from the BBs. Yes, CV and PJT are strong out of the EBs but don't sleep on PWP either...
Extremely helpful. Thanks a lot!
Jefferies very strong as well
In a similar position. Anyone have insight into what deal flow is looking like right now?
I think M&A activities basically have come to a halt right now
Did you lateral in or starting after graduation? Congrats - I'm looking to join a HC group.
Current League Table Data for HC M&A (1 Jan. 2020 - Present): JPM, GS, Barclays, Moelis, MS, Centerview, Citi, Gugg.
Source: FactSet
https://my.apps.factset.com/idea-screening/?_IS2_MODE=FULL&_IS2_ACTION=…)
Not really sure why I get Monkey Sh!t when I simply summarized a league table for HC M&A. Do you have other information to refute this?
lol WSO in a nut shell - guy posting raw unbiased data gets MS'd
Hoes mad, this is true.
This guy def works at Barc HC ECM
https://www.wallstreetoasis.com/forums/healthcare-overview-part-1
From a healthcare services PE guy 1. Modern Healthcare is a good read 2. Valuations are typically pretty high given the organic growth in the space. Very sector specific however. The regulatory piece is typically the most important part of each transaction in terms of diligence and reps in the purchase agreement 3. Large focus on outpatient type services vs. the typical in patient setting because the services / site of services are cheaper and typically yield better outcomes. Value based care is taking over a lot of fee for service (offering ancillary services is becoming a huge opportunity for providers). Commercial payors are reimbursing a lot more services that they hadn't previously in an effort to drive down long term costs. Think autism, MAT, etc. 4. Healthcare PE / Retail & Consumer PE (has a lot of parallels to healthcare) / Any Services Based PE as well 5. GS for sure. Moelis is very strong in the EB space. Sold one of my portcos
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Worked in HC for four years now (2 in IBD, 2 in PE). Focused on HC Services.
Various email newsletters can be helpful (BRG EyeOnHealthcare, Daily Dose by Modern Healthcare, Term Sheet, PEHub had a newsletter too that I can't find). You'll learn everything you need to know on the job though.
Valuations have been pretty high, especially in outpatient, multi-site businesses that have both strong organic growth (4-5% SS growth per year) and significant roll-up opportunities. Spaces such at PT, urgent care, vet health, etc. have been a huge focal point for sponsors and as result EBITDA multiples have been anywhere from mid to high teens. I haven't seen us move forward in a process with a bid less than 9x since I've joined, if that's helpful. Across the board, HC services multiples have gotten very frothy.
Working off the above, a shift to lower cost of care settings (outpatient PT, urgent care, etc.) has been one of the largest trends, as payors push more and more plan members into cheaper care settings and avoid the ER/higher cost settings at all costs. There is also an acute focus on providers offering quality care with better outcomes (so, PT locations that have a proven ability to nurse a patient back to health quickly and efficiently, thus saving the payor money). There also has been a big shift of health systems trying to integrate into outpatient and other offerings in order to improve their network and patient reach (so, a large hospital/health system acquiring urgent care clinics/providers, PT locations, etc. in order to expand their offering away from just acute care/ ER setting).
TPAs have also been really hot lately, again feeding off of the need for lower cost care, as companies have become acutely focused on finding efficient TPAs to help manage their health and other benefit plans.
HC PE and HC focused hedge funds are probably the easiest exits. Have seen people move on to generalist funds, too. Corp dev/BD is another option. Majority of my analyst class moved on to HC PE/VC/GE.
Evercore has probably been the most impressive to me. Centerview is great too. Gugg also solid. Obviously, GS/MS/JPM are all great too.
Would MS SF HC (small office) have the same potential for buyside exits or only NYC? I get the sense they mostly do equity stuff for w coast biotech. also, does HC pigeonhole you coming out of analyst years if you’re looking to recruit buyside?
how is BAML healthcare
BofaS is bad to say the least. Lots of pitching, poor staffing model, pitch to mandate ratio is poor and culture is pretty toxic (coming from a friend). Attrition is so high at the junior level (Ana and assoc. can't stay past 1 - 1.5 yrs without going nuts)
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