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Healthcare Services Q4 2021

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Healthcare Finance Trends: The Rise of Private Equity Investment

In general terms, private equity (PE) primarily refers to investment funds, usually in the form of limited partnerships, that buy and restructure companies. As the name suggests, PE funds are not publicly traded. The term private equity also encompasses hedge funds, closed-end funds and unit investment trusts.

Private-equity investments are mostly made by a PE firm, venture capital (VC) or angel investor. Although their strategies vary, all forms of PE investment provide working capital to a target company to support expansion, product development and restructuring activities.

The most common PE investment strategies include leveraged buyouts, VC, growth capital, distressed investments and mezzanine capital. Whereas leveraged buyouts mostly involve gaining majority control of an existing firm, VC investments mainly target younger, emerging companies without obtaining majority control. In addition, as the name suggests, leveraged buyouts make considerable use of debt finance to acquire companies.

In addition to acquiring or funding companies, PE investment also can target certain asset classes and activities, most notably real estate, in the form of Real Estate Investment Trusts (REITs), infrastructure and utilities.

The size of the PE industry in the U.S. is estimated at $230.6 billion of revenue as of July 2021 across 12,503 businesses. Total value growth is forecast to be 9.4% in 2021, which would bring the five-year annual growth rate to 4.3%. Growth over the next five years through 2026 is expected to exceed this pace posting a 5.5% annualized rate, which would take total PE revenue to $301.1 billion.


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Healthcare Services Q4 2021

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