Geopolitical shocks and private market valuations , Oak HC/FT’s Andrew Adam s talks healthcare trends

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The Wire

Mar. 2, 2022

Geopolitical shocks and private market valuations, Oak HC/FT’s Andrew Adams talks healthcare trends

Happy Wednesday!

This is Chris, on the Wire this morning.

We’re all watching the tragedy unfolding in Ukraine. The implications beyond the brutality and slaughter visited upon the sovereign nation by a mad tyrant include shocks to the global economy, and how various markets will fare in a time of extreme geopolitical crisis.

Such uncertainty inevitably ripples into the private markets and impacts valuations. These external shocks were happening even before Putin embarked on his imperialistic crusade, as public market volatility, especially around tech stocks, are influencing private valuations, perhaps best seen in the secondary market.

Large portfolios of LP stakes that hit the market this year, are likely being priced to net asset values as of Sept. 30. That pricing has quickly become irrelevant considering what has happened in the markets and the world since the start of the year.

So how do secondary buyers price the portfolios? There are large ones out there – CalPERS is selling a $6 billion portfolio; APG has a $2 billion-plus offering, and as we reported this week, CPPIB is shopping a portfolio with NAV of around $2.2 billion. And that’s just a select few – many more are out there or were set to come on the market.

Sources are mixed on how the market will proceed: one source said they wouldn’t be surprised if buyers “hit the pause button” for a period of time, even as many of them continue to raise large funds. Another source on LinkedIn said buyers are in such need of diversification after making large concentrated bets on things like single-asset deals that they won’t mind paying what might be considered a high price (nowadays) for a quality portfolio.

I’m waiting to see if sellers start to pull their offerings back amid pricing uncertainty. And of course, we’re not even talking about GP-led deals. What are you seeing out there? Hit me up at cwitkowsky@buyoutsinsider.com.

Also ...: PE Hub’s ongoing series on private equity firms investing in healthcare continues with insights from Andrew Adams, co-founder and managing partner of healthcare at Oak HC/FT.

“Healthcare is growing, and there is a lot of opportunity to improve the system without changing any sort of laws or regulations, a lot of common sense and business models that can drive a lot of efficiency for the system that will save money and quality of care and so much entrepreneurial energy." Read the interview here on PE Hub.

That’s it for me! As always, hit me up with tips n’ gossip, feedback or your thoughts on the changing market at cwitkowsky@buyoutsinsider.com or find me on LinkedIn.

Read the full wire commentary on PE Hub ...

Also of note (may require subscriptions)

TPG Capital is raising its ambitions for its ninth flagship fund, targeting between $14 billion and $15 billion for the pool, according to sources and public pension documents. (Buyouts)

Two big Canadian pension systems (CDPQ and OMERS) that have historically targeted private equity returns in the high teens did a lot better in the record deal market of 2021. (Buyouts)