Highlights
- Higher rates, regulatory uncertainty and rising costs mean prospective buyers now need genuine, defensible differentiation and evidence that growth is sustainable.
- European healthcare businesses with multiple credible growth avenues give management and sponsors more ways to succeed across different market conditions, and this is what separates premium assets from the rest in the current environment.
- Buyers increasingly see talent as key in European mid-market companies – from backing the right management teams to retaining key individuals after acquisition.
Healthcare remains highly attractive to investors, but buyers have become more selective. Genuine differentiation, multiple avenues for growth and exceptional management separate premium assets from the rest.
Healthcare remains an attractive market for both strategic and financial buyers, but simply operating in the sector no longer commands a premium.
That was the message from a panel at Inflexion’s inaugural Healthcare Symposium, moderated by Dieter Meyer, Partner at Bain & Company. “Back in 2021, healthcare in itself was almost an investment thesis,” Dieter explained. Structural growth and resilience supported high valuations. Since then, higher interest rates, regulatory uncertainty, rising labour costs and greater technology and cyber requirements have made some of those assumptions harder to underwrite.
The market has split. High-conviction assets still draw strong interest and premium valuations, while weaker businesses face more scrutiny. So what are buyers looking for now?
What makes a healthcare business worth paying a premium for?
Andrew Neville, Partner at Inflexion: Many of the fundamentals haven’t changed. We’re looking for a large, growing international market with long-term demand drivers and a business with real, defensible USPs – ones that translate into high growth, strong margins and cash conversion.
What has changed is the level of scrutiny around whether that performance will last. Some businesses benefited from favourable market conditions without being the best asset in their subsector. The question now is what will still be there when the tide goes out.
That’s why several routes to growth matter so much. Investing means making decisions under uncertainty – we won't get everything right. A business with five or six credible paths forward gives a good management team more ways to succeed, whatever the market does.
Maily Miglani, VP Strategy and Corporate Development at Smith+Nephew plc: For a strategic buyer, the top reason to pay a premium is strategic fit, which usually breaks into three buckets: commercial synergies with the existing business, disruptive innovation that changes the standard of care or economics of treatment, or a chance to establish or strengthen a leading market position.
Innovation is probably the hardest to judge. We've seen businesses we passed on ten years ago that are performing brilliantly now. Predicting which technology will change the patient pathway is genuinely difficult.
Jan Hendrik Egberts, CEO of NeoVac: Different investors succeed with different strategies, but what matters is whether they actually add value — building the team and infrastructure behind a successful exit. Specialising in a niche and doing it well can also create real value. But nobody five years ago predicted everything now shaping this industry, from AI to geopolitical upheaval — so flexibility matters more than a rigid five-year plan.
What should businesses invest in today to be attractive to buyers in five years?
Jan: Beyond operating in a strong market, it comes down to people — an excellent management team and a board that brings different perspectives and stays close to the market. You need an organisation that keeps testing where the market and technology are heading, rather than assuming today's strategy still holds in five years. Every business has surprises; how well people collaborate determines how it responds.
Andrew: It's tempting, as investors, to focus on markets, businesses and numbers — but that's maybe 40% of the job. The rest is people: backing strong executives, surrounding them with good non-executives, bringing in real domain expertise.
Diligence only gets you so far. The first six to twelve months spent understanding the organisation properly are often the most valuable.
Maily: People are critical, but so is preserving the know-how you have acquired, across product, manufacturing, market access and clinical functions. We identify where that knowledge sits, build retention and incentive plans for key people, and grow internal teams that can absorb it, since some founders decide corporate life isn't for them.
I'm also cautious about revenue synergies. Corporates tend to be overly optimistic about them — after 20 years doing this, I'd rather not build an acquisition case on them.
Where are the most interesting healthcare opportunities today?
Andrew: We’ve been finding opportunities across pharma products, pharma services, medtech and services into the medtech ecosystem for some time.
One area I'm particularly bullish on currently is medical consumables. Demand has remained relatively stable through some significant market disruption. It's less exposed to the biotech cycle, geopolitical developments or some of the potential disruption from AI. If you're producing essential products that enable care or help save lives, there can be an attractive predictability to demand.
Maily: We like adjacent segments with real unmet need, where innovation has lagged — sleep apnoea is one example, a large market where existing devices aren't very effective and the burden on health systems is rising. We're also thinking harder about prevention: Smith+Nephew is fundamentally a treatment company, but there's an opportunity to reach the same patients earlier, through monitoring and interventions that head off a future episode of care.
Jan: Some of the best ideas come from staying close to the front line — talking to sales teams, clinicians and purchasers about the problems they're actually trying to solve. That's where unmet need becomes visible, and it points toward the businesses with the most potential.
Healthcare remains structurally attractive, but applying a highly selective lens is key. We are looking for differentiation and multiple growth paths, with the people behind the businesses ultimate drivers of success.
Ambitious businesses can grow faster with the right capital and expertise, with Inflexion’s flexible funding offering minority or majority capital and access to a sizeable team to accelerate growth. The Inflexion team has significant experience in supporting the growth of a number of healthcare companies of different sizes, including CNX Therapeutics, Ensera, GlobalData Healthcare, Primed, Proteros, Rosemont and Upperton Pharma. All have access to Inflexion’s value acceleration strategies of M&A, digital enhancement, international expansion, talent management, commercial effectiveness, and sustainability.
