‘Glory train’ that buoyed private equity may be running out of steam

The largest private equity deal in history, $17 billion in cash, has just closed, adding a new signature to private equity’s record of megadeals.

A partnership between Veritas Capital and Hellman & Friedman may well put to rest for good a question that hovers over the industry: has the $25 billion that private equity has poured into public companies in the U.S. this year finally run its course?

The money has come pouring into mid-size and small companies in the health care sector, and health care companies that compete with Athenahealth, one of the more well-known companies in the business.

Like its peers, Aetna, Humana, UnitedHealth and Cigna, Athenahealth has received a number of takeovers in recent months and is looking to cash out its private equity investors in a deal that will give them more than twice their original investment, according to reports.

Analysts see evidence that the sector might finally be oversupplied, and many expect that private equity’s next bolt-on acquisition could be a smaller company of that nature.

“We think the private equity gravy train may have run out,” said Terry Laughlin, chief operating officer of the healthcare investment bank Privet Fund, who noted that private equity firms have had a long-standing investment in the sector.

“It’s unusual to see a full industry consolidation,” said David Palmer, an analyst with the financial services firm Baird. “I don’t think the market is saturated.”

For now, the health care sector may not feel the pinch of private equity competition, but analysts predict that the recent acquisition spree in the market could cool this year, as private equity bets on companies that could fit into the market economy.

“There are more than a few good ones to choose from,” said Jon Millar, a healthcare analyst with William Blair. “But I don’t think they’re all out there.”

Leave a Comment