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European PE healthcare deal value rises sharply after onset of COVID-19

Aggregate European private equity healthcare deal value reached $5.1 billion as of the end of February, up sharply from the $1.4 billion recorded for the entire first quarter of 2020, Preqin data shows.

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Healthcare deal volume in the region troughed in the 2020 second quarter at 11, with a combined value of $73.4 million, according to Preqin data. But private equity and venture capital investors quickly recovered from the initial wave of market uncertainty that accompanied the onset of the COVID-19 pandemic, and activity increased in the second half of the year.

In the end, total healthcare deal value in 2020 was the second highest in five years, reaching $475 billion across 863 deals. 2018 took the top spot, with $484.3 billion across 1,196 deals.

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2020 was also the second-largest year in the past five for private equity fundraising. In total, 21 funds closed, raising an aggregate $5.6 billion. Again, 2018 took the top spot, with same number of funds closing but aggregate capital raised hitting $9.5 billion.

There are currently 48 Europe-focused private equity funds that are focusing on healthcare assets, according to Preqin data.

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Growing ventures

Aggregate venture capital deal value in healthcare was just below the $10 billion mark in each 2019 quarter, but in the 2020 third quarter, due to the pandemic, it rose to $17 billion, according to Preqin. This rise is explained by the ticket sizes, with the average deal value rising from less than $20 million to over $30 million in both the second and third quarters of 2020.

Growth in aggregate value of venture capital healthcare deals has outpaced that of private equity deals quite significantly in recent years, David Lowery, head of research insights at Preqin, told delegates at SuperReturn Europe Virtual on March 1.

Biotech has attracted significant investment in recent years, even prior to COVID-19 vaccine success in 2020. Activity has continued into 2021; to date, Preqin has tracked 75 completed venture capital deals in the European healthcare sector, which includes biotech, medical devices, healthcare IT and pharmaceuticals.