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The Wire

Nov. 1, 2021

Rewiring healthcare: value-based care fuels groundswell of investment; GTCR buys Cisive

Morning, hubsters!

 

Deep Dive: The last several months have produced a cavalcade of investment activity in more than one pocket of healthcare. One particular theme that investors are showing a deep commitment to? Value-based care, a payment model rewarding doctors for some measure of quality (like fewer hospitalizations) versus the volume and types of procedures performed. 

 

Value-based care is an inexorable trend that will broadly benefit the entire industry, according to Ezra Perlman, co-president at Francisco Partners. “There’s no other market where trillions of dollars of spend are going to be fundamentally rethought, re-evaluated and redefined over the coming 15 or 20 years,” Perlman says. “There’s lots of good reason to be increasingly excited about the segment, but it’s that excitement that can lead to exuberance and overvaluations in both public and private markets.”

 

As Perlman sees it, the evolution of value-based care is not unlike the e-commerce and internet investment bubble of late 1990s and early 2000s.

 

The combined market capitalization of recently emerged value-based care companies now totals almost $60 billion in the public markets, up from essentially zero a year ago, according to SVB Leerink. As strategics continue to embrace this theme with force, oftentimes partnering with or buying from investors, PE firms are proactively placing their bets behind young companies and entrepreneurs, hoping to get in early to capture value-creation. 

 

“Right now, the edge in investing in healthcare is more in the barbells,” says David Caluori, a general partner at Welsh, Carson, Anderson & Stowe. “It is about getting in early when you have the ingredients for success... "

 

Check out my full deep dive on PE Hub with many more insights from additional investors spanning InTandem Capital, Oak HC/FT, General Atlantic and NEA as well as intermediaries from SVB Leerink, Deutsche Bank, Guggenheim and Bain & Co. 

 

That’s it for me! Have a great week ahead, and as always, write to me at springle@buyoutsinsider.com with any tips, gossip or feedback. 

 

Read the full wire commentary on PE Hub...

 

Also of note (may require subscriptions)

Secondaries: Corsair Capital is considering a process for its portfolio company First Eagle that would extend its hold and provide more capital to continue growing the asset management business, sources told Buyouts. The deal would be one of numerous single-asset processes that have hit the market this year. Read it here.

 

Biggest: Carlyle’s private credit group, which is looking to amass $80 billion-plus in assets over the next four years, saw robust fundraising in the third quarter, bringing in $4.7 billion. The fresh commitments, reported in Carlyle’s Q3-2021 earnings statement, represent the credit platform’s biggest quarterly haul on record. Read it on Buyouts.