With numerous successful investments made over the years, private equity has played a significant role in the healthcare industry. Here are some of the best healthcare private equity investments of all time, judged by the quality of the company today, the returns provided to the investment firm, and the breadth of the executive teams.
HCA Healthcare: One of the largest for-profit healthcare systems in the United States, HCA Healthcare has been a fantastic portfolio company for private equity firms KKR and Bain Capital. In 2006, the company was taken private in a leveraged buyout (LBO) and re-listed in 2011. HCA's stock price has risen since then, making it one of the most profitable private equity investments in healthcare history. According to reports, KKR and Bain Capital earned an IRR of more than 30% on their investment.
DaVita is a leading provider of kidney care services and a former portfolio company of the private equity firm TPG. In 2012, the company was taken private in a leveraged buyout and re-listed on the New York Stock Exchange (NYSE) in 2014. DaVita's stock price has risen significantly since then due to the increasing average age of the US population and strategic growth initiatives of both the company and the direction of the firm. TPG reportedly earned an IRR of more than 25% on the investment.
Cardinal Health: Cardinal Health is a leading provider of healthcare services and products who specializes in patient care, and it has proven to be a profitable investment for private equity firm Kohlberg Kravis Roberts (KKR), one of the most well-known private investment firms in history, as well as one of the earliest. In 2007, the company was taken private in a leveraged buyout and returned to the public market in 2009. Cardinal Health faced some tumultuous times over the past few years, but has recovered as of recently with healthy long-term growth with an acquisition-driven strategy.
UnitedHealth Group: One of the largest healthcare companies in the United States, UnitedHealth Group has been a lucrative investment for private equity firm Clayton, Dubilier & Rice. In 2002, the company was taken private in a leveraged buyout and re-listed in 2006. United Health generates a yearly revenue of over $285 billion dollars, with service offerings in over 150 countries and nearly 400,000 employees.
PharMerica is a leading provider of pharmacy services to long-term care facilities and a portfolio company of previously mentioned infamous private equity group KKR. PharMerica was acquired in 2017 in a deal valued at $1.4 billion dollars including debt, a strong sign for the long-term pharmacy care-focused enterprise.
Overall, these healthcare private equity investments have demonstrated the industry's potential for significant returns, even when the companies being acquired have graduated their growth state, acquisitions and innovation always paves the way for additional alpha. As the healthcare industry evolves, private equity firms will continue to target companies strong fundamentals, a deeply respected brand name, and strong leadership team.