Blackstone and Omers Offload Healthcare Assets: A Reflection of Private Equity’s Exit Wave

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Introduction

The recent move by Blackstone and Omers to divest their holdings in healthcare service providers marks a significant moment in the broader private equity (PE) landscape. Both firms are seeking multibillion-dollar deals to sell HealthEdge and Premise Health, respectively. These transactions underscore a larger trend wherein private equity firms, after years of holding onto healthcare assets, are now looking to exit their investments. This shift is largely influenced by market dynamics, including high interest rates and increasing investor demand for liquidity.

This article explores the details of Blackstone and Omers’ proposed sales, the legal and commercial factors at play, and the broader trend of private equity firms seeking exits in the healthcare sector.

Blackstone and Omers: The Transactions at Hand

Blackstone, a global investment firm, has engaged advisors to facilitate the sale of its majority stake in HealthEdge, a healthcare software provider that streamlines operations for health insurers. The deal is expected to value HealthEdge at over $2.5 billion. Blackstone had previously tested market interest in the company in 2022 but failed to secure a deal at the time. In 2021, HealthEdge attracted a minority investment from Coatue Management, a hedge fund, at a valuation of approximately $2 billion. The company is reported to have generated earnings between $100 million and $120 million last year, making it an attractive acquisition target for other investors, including private equity groups.

Similarly, Omers, one of Canada’s largest pension funds, is looking to sell Premise Health, which operates one of the largest direct-access care networks in the United States. The company manages 800 wellness centres across 46 states, catering to over 2,500 employers. Omers acquired Premise Health in 2018 for slightly over $1 billion, including debt, and is now aiming for a $2 billion valuation in the current sale.

A Broader Trend: Private Equity’s Exit from Healthcare Investments

The sales of HealthEdge and Premise Health are part of a growing wave of private equity exits in healthcare. There are several factors that are driving this shift.

One key factor is prolonged holding periods. Historically, private equity firms have sought to exit investments within three to seven years. However, economic instability and rising interest rates have led to longer holding periods. A study by S&P Global indicated that, by November 2023, North American buyout funds were holding investments for an average of 7.1 years, which is the longest duration in two decades.

Another factor is high interest rates and capital constraints. Over the past few years, high borrowing costs have dampened deal activity in private equity. Many firms postponed exits whilst waiting for more favourable conditions. Now, as interest rates stabilise, there is renewed optimism that the mergers and acquisitions market will become more active. This shift is prompting firms to pursue long-awaited divestitures.

Investor pressure for liquidity is another driving force. Limited partners in private equity funds are increasingly demanding liquidity, particularly in light of economic uncertainties in recent years. Exiting long-held healthcare investments allows private equity firms to return capital to investors and free up resources for new opportunities.

Finally, strong market demand for healthcare assets is contributing to this trend. Despite various challenges, the healthcare sector remains an attractive investment space due to its resilience and growth potential. In 2024, global healthcare private equity deal value reached approximately $115 billion, the second-highest on record, with North America accounting for 65% of this value. 

Conclusion

Blackstone and Omers’ planned divestitures of HealthEdge and Premise Health highlight the accelerating trend of private equity exits in the healthcare sector. Market conditions, increased interest rates and investor pressures are prompting PE firms to offload long-held investments, signalling a broader shift in the industry. As economic stability returns and M&A activity increases, more private equity firms are likely to follow suit. However, successful exits will require careful legal structuring, strategic positioning, and thorough due diligence to navigate the evolving healthcare landscape. For private equity investors and stakeholders, understanding these market forces will be critical in making informed decisions about the future of healthcare investments.