Recap 2013: PE dealmaking in healthcare hits new high, M&As and PE exits also rocket

By Lohit Jagwani

  • 30 Dec 2013
Recap 2013: PE dealmaking in healthcare hits new high, M&As and PE exits also rocket

Healthcare sector played true to its characteristics of being a defensive bet for investors this year. The sector bucked the overall slowdown in dealmaking in the country for the second year running by hitting a new high in terms of attracting private equity firms and saw merger & acquisitions (M&As) shoot up with a slew of large transactions across pharma and healthcare services segments.

This year, there have been 72 PE deals worth $1.16 billion as against the previous best of PE investment of $1.07 billion spread across 65 deals in 2012, as per data collated by VCCEdge, the data research platform of VCCircle. This means roughly a tenth of all PE money flowing into Indian firms went to healthcare sector this year.

This comes at a time, when overall PE investments are yet to mark a clear revival despite few large deals and deal volumes, per se, has been lower than 2012.


“Healthcare sector has done better than other sectors for various reasons. One is that the demand supply gap is still very skewed and likely to remain so for the next few years. Others are lack of fierce competition, healthcare still is a consumer led story, people moving to preventive healthcare, increase of accessibility through technological innovation like telemedicine among others,” says Rana Mehta, healthcare practice leader, at PwC India.

One noticeable difference this year was that even as the number of angel investment and venture capital deals were almost at the same level as last year, PE deals rose which also boosted the overall deal value.

Some significant PE deals this year were KKR’s investment in Gland Pharma; Carlyle buying out Avenue Capital while also putting some fresh money in Global Health, which runs Medanta; Bain Capital buying Blackstone’s stake in Emcure Pharma and IFC investing in Fortis Healthcare.


Healthcare services and delivery space saw a higher number of deals but a lower quantum compared to 2012.

“The year saw a fair amount of investments in unique healthcare service models. It will be interesting to see how some of these investments scale up over the next few years. The year also saw traction in the medical device and pharma segments. In both these segments the underlying fundamentals remain strong in spite of the regulatory and quality related overhang,” says Shiraz Bugwadia, managing director of o3 Capital.

Adds Amit Mookim, head of healthcare and development services sector at KPMG, “There were a large number of smaller sized deals that happened this year especially in alternative formats like primary care, dental and mother & child among others. Sectors like single specialty, diagnostics and mid-sized hospital chains saw most of the action.”


Pharmaceutical and lifesciences, on the other hand, saw a different trend with lower number of transactions but higher value, partly due to the $200 million investment by KKR in drug maker Gland Pharma.

Private Equity Exits

This year was equally strong for PE firms in terms of liquidity despite the poor state of the primary market. While Emcure Pharma and Intas Pharma are believed to have shelved the planned IPO despite filing documents for a public float, PE investors saw a slew of exits worth over $500 million.


The biggest by far was Apax Partners exiting from its six year old bet on Apollo Hospitals with around $220 million, followed by Avenue Capital’s exit from Medanta in a secondary deal with Carlyle and Blackstone exiting Emcure Pharma as its proposed IPO is unlikely anytime soon.

“The market right now is not IPO friendly, so we saw more secondary exits and strategic sales,” says KPMG’s Mookim.

M&As in Healthcare


If PE firms were busy sewing investment transactions, so were healthcare companies in snapping rivals. Strategic deals shot up with a string of large size transactions led by Mylan’s blockbuster deal for buying Agila from Strides Arcolab.

Other prominent transactions included Cipla buying majority stake in South African distribution partner, Torrent Pharma snapping the domestic formulations business of Elder Pharma besides Fortis selling assets in Australia and Vietnam as it changed its corporate strategy.

Pharmaceutical sector clearly dominated M&As. One reason for this was leverage creating pressure to sell, according to Sujay Shetty, pharma and lifesciences leader for PwC.

The M&A activity continued despite issues like drug pricing control in pharma and Supreme Court’s ruling on clinical trials for CRO segment et al.

According to experts, this growth is likely to continue for the next few years backed by  macro trends that compliment the healthcare sector.

“I see healthcare transaction market to be active at least for the next 4-5 years. Next year will see far more M&A action and number of PE investments are likely to increase. There would also be more consolidation in hospitals space by regional players,” says Mookim of KPMG.

Dealmakers also expect cross border activity in the healthcare services vertical. “We have been seeing a lot of interest in cross border M&A activity. A number of Indian hospital chains are looking at large acquisitions, predominantly in South East Asia and Middle East,” according to Mehta of PwC.

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