We were pleased to have terrific attendance at our annual Healthcare & Life Sciences Private Equity and Lending Conference. The deep-dive discussions into various sectors, and on the industry and deal-making generally, were extensive and produced interesting discussion.
Over the course of the next few weeks, we will be publishing a series of posts coordinated by our colleagues Holly Buckley and Leah Eubanks with key takeaways from various conference panels. Before we begin sharing those posts, this first piece provides five key takeaways on the industry and deal-making generally, based on candid discussions between speakers and attendees.
The premier two-day conference, held February 20-21, provided content-rich programming that explored new ways to successfully close transactions and achieve growth with healthcare companies, lending institutions and private equity firms.
This year, keynote speakers James Carville and Ari Fleischer discussed governmental policies and administration affecting the healthcare industry. Monica Mehta, Managing Principal of Seventh Capital, joined attendees on day two as speaker for the Women in Private Equity and Finance Networking Breakfast as well as presenting the lunch keynote and serving as a key panelist in a discussion spotlighting the growth of women in private equity investments.
The conference drew registration of more than 850 professionals from private equity funds, senior and mezzanine lenders and investment banks, alongside the vast array of C-level executives, consultants and principals in the healthcare and life sciences industries. The event continues to deliver as one of the best networking conferences of its kind. The deep-dive discussions into various sectors, and on the industry and deal-making generally, were extensive and produced interesting discussions across the board.
Following are some key takeaways from the conference:
1. Senior and junior lenders noted that debt capital continues to be readily available, with predictions that the bullish approach would continue for at least the next two to three years. Lenders noted that they were often going outside their comfort zone into higher leveraged structures, with fewer covenants, to deploy capital. Many discussed changing their “strike zone,” looking at companies with lower EBITDA and beyond traditional healthcare providers to health IT, pharma and medical device. Several noted that, while the amount of capital available was at some of its highest levels, appropriate target companies/borrowers were harder to find. But consensus remains that 2019 should yield some of the highest returns for healthcare/life sciences debt investment.
2. Over the past several years, there has been a renewed discussion about the dearth of women in private equity firms and a new energy for making change. The conference continued and elevated this discussion through a keynote event, “The Growth of Female Founders, Company Executives & Private Equity Leadership in Healthcare Private Equity Investments,” as well as at the lively Women in Private Equity and Finance Networking Breakfast. Private equity firms recognize that in the shifting landscape of new limited partner players, evolving target company leadership and focus, and a shifting role of women generally in the U.S. economy, long-term success hinges on the recruitment, advancement and retention of women in private equity.
3. Physician alignment continues to be an area of focus for private equity-backed platforms. During various panels, experts discussed a range of equity strategies, cultural improvements and governance strategies to align physician and platform successes. They noted that market compensation for various specialties typically falls within a narrow band, such that platforms need these other alignment strategies to succeed. An alignment focus may be a key differentiator in this investment push, as compared to the 1990s failure of some physician practice management companies, where the trend was more focused on reducing compensation to grow EBITDA. This focus may provide more long-term successes for these platforms.
4. Panelists at various sessions noted issues with recruiting the next generation of providers. Such concerns permeated diverse specialties from orthopedics, ophthalmology, dermatology and oncology. In various conversations, panelists discussed the utilization of significant signing bonuses, long guarantees and student loan repayments. Some platforms noted expansion of programs like clinical research to attract new providers. Others have allowed younger physicians to work part-time and spend the balance of their time with another group to show the value of their organization and culture. Finally, platforms continue to review ways to use non-physician providers in an optimal manner to ensure professionals are operating at the “top of their license.”
5. Conference attendees openly predicted a growth in platform exits over the next couple of years. Such exits make sense after the record run-up of private equity deals in the healthcare space over the last five years. Funds exiting their initial platform investments will likely accelerate. Panelists heard about recent successful exits, like Pouschine Cook Capital Management’s exit from Golden State Dermatology and Sheridan Capital’s partial exit and recapitalization of Smile Doctors, as examples to follow.