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Private equity firms that invest in health care are either getting used to working in an uncertain environment or feeling a little more secure about the marketplace since the Supreme Court upheld the Patient Protection and Affordable Care Act (ACA) in June 2012. Look no further than the increase in exit volume for proof.
In 2012, private equity firms slowly started their exits. In fact, exit activity had been on a steady downward trajectory from the third quarter of 2011 until halfway through 2012. However, after the ACA was upheld in June, exit activity in the health care sector increased in both the third and fourth quarters.
In the fourth quarter alone, there were 20 exits—the highest number in the health care industry since the third quarter of 2011.
“The details of ACA and how it will be implemented still haven’t been worked out,” says Anne McGeorge, national managing partner of Grant Thornton LLP’s Health Care practice. “But there has been some clarity. Private equity firms are quickly learning that if they want to continue to operate in the health care space, they have to get comfortable making investments in an uncertain regulatory environment. Generally speaking, investors are feeling more positive about macroeconomic conditions, which make firms feel more positive about exiting portfolio companies, and this includes the health care sector.”
Sedic Ampanas is a director in Grant Thornton LLP’s Transaction Advisory Services group. He has more than 14 years of experience advising private equity groups and strategic buyers in the United States and abroad on acquisitions and divestitures across wide range of industries.