Experts Weigh-In on Health Care Investing at the Council’s Financing the Deal Event

On Wednesday, May 12, the Nashville Health Care Council hosted “Financing the Deal: Deal-Making Trends and Strategies for Health Care Companies,” an annual discussion offering insights from top financial executives on health care investment trends. The speakers offered insider perspectives on the state of the health care private equity market, sectors to watch and the outlook for the health care industry in a post-pandemic world.

The conversation was moderated by Tom Wylly, senior partner, Brentwood Capital Advisors. Panelists included Lauren Brueggen, partner, Heritage Group; Nancy-Ann DeParle, managing partner and co-founder, Consonance Capital Partners; and Mark D. Taber, managing partner, Great Hill Partners.

Opening remarks focused on the effects of COVID-19 on the panelists’ portfolio companies. Some areas, such as e-commerce and telehealth ventures, saw exponential growth, but required tremendous efforts behind the scenes to meet increased demands. Other companies, such as physician services, saw periodic declines as in-person encounters dropped dramatically in the spring of 2020.

“I’m proud of our companies’ resilience and ability to evolve quickly in the face of change. For example, we are partners with a multi-specialty physician group. Last spring, as non-COVID-19 visits to their clinics declined, they quickly adapted their practices to facilitate COVID-19 testing and were able to pivot the business effectively,” said DeParle. “Another portfolio company, a diagnostics lab, quickly fulfilled a huge need for hospital clients by developing a PCR test for COVID-19. All of our partner companies became experts at figuring out how to meet urgent patient needs under stressful and rapidly changing circumstances.”

The panelists identified innovations that flourished during the pandemic that are here to stay, such as telehealth and digital connectivity. But, these models come with a new set of challenges.

“We crammed a decade’s worth of trialing into a year with virtual health care. That genie won’t go back in the bottle. But now we need to think through workflow issues that come along with this shift. How does a hybrid of office visits and virtual visits work? There are still many things to sort out,” said Taber.

While deal flow stalled in the spring of 2020, all the panelists agreed that activity picked up again by last summer. Now running at record levels, service providers and vendors that help to make deals happen are overbooked. Excitement around special purpose acquisitions companies (SPACs) in Q1 of 2021 increased interest in investments and, in some cases, raised valuation expectations.

“We’ve seen an enormous increase in deal volume this year, and the speed of the deal process has changed dramatically in just the last six months,” said Brueggen. “Companies are coming to market and expecting to receive term sheets in less than two weeks and as investors, we need to find ways to adjust to these new expectations.”

Speakers identified behavioral health, telehealth and home health as sectors of interest. Taber said he sees opportunities in payer cost containment, as well as innovations that help employers save money and bring quality benefits to their employees. Brueggen is currently investing in companies that integrate physical and behavioral health services for better outcomes. And DeParle identified thematic investing in “closed-door” pharmacies and pharma outsourced services as a current focus.

“I love that even after working in health care for decades, there is always something new to explore,” said DeParle.

Though the speakers hold investments throughout the country, all of them have multiple investments in Nashville-based companies. They praised Nashville particularly for its innovative ecosystem, burgeoning health technology leadership and access to talent.

“At Heritage, we feel lucky to be a part of the Nashville healthcare ecosystem,” said Brueggen. “The quality of healthcare talent is unrivaled and we’ve been able to help both our Nashville and non-Nashville based portfolio companies build a strong presence here.”

“No other place in the country has health care gatherings like they do in Nashville – not even where I’m from in Boston. I spoke at a Nashville Health Care Council event a few years ago, and there were more than 400 attendees,” said Taber. “This is such a vibrant community, and I hope you don’t take it for granted. The opportunity to connect in this way – that’s an amazing resource and catalyst for accomplishing great things.”