Healthcare investment banking is an industry group in the investment banking department of an investment bank. The main focus of this group is on healthcare companies, and it is there to give advice to clients on issues such as mergers and acquisitions, capital services like equity, and divestitures. The group’s clients can be divided into 3 main categories. These are healthcare facilities and providers, Bio-pharmaceutical companies, and medical equipment devices companies.
Healthcare Facilities and Providers
These companies offer facilities, such as surgical centers, hospitals, nursing homes, rehab facilities, and care clinics. The companies have more stable revenue when compared with other healthcare sectors, providers and facilities. The reason is demands for drugs, hospitals, and medical supplies continue to be significantly unaffected despite economic conditions. To increase returns, most of these companies regularly implement high leveraged buyouts for their operations.
Medical Equipment and Devices Companies
These companies function on a larger scale when compared to healthcare facilities and providers. The main difference is in the way they make revenues. Medical equipment and devices companies provide their medical equipment and devices for hospitals and clinics, or any other type of healthcare facility. The main levers in this group are government approvals, regulations, the product pipeline, and pricing power. In this segment, leveraged buyouts are usually implemented in order to raise capital to fund research and development.
Biotechnology and Pharmaceuticals
These are the companies that invent new drugs, as well as new biotechnology applications for the healthcare sector. They basically make money by selling the drugs they make until their patent expires. Most of their resources and time are spent developing new products. Even though there is no guarantee that all the drugs will be successful, if they are successful with just one or two drugs, they can make millions or even billions of dollars.
You will find many healthcare startups in this category, which explains why there are more acquisitions and mergers in this category than the other two. Investment banks are typically involved in merger and acquisition transactions, as well as leveraged finance advisory. It is also the job description of investment bankers to assist clients in determining the type of products these companies should focus on and how much they should sell them for.
Advantages of Joining Healthcare Investment Banking
Many skill sets — Working across different kinds of transactions, including debt and equity capital market, and mergers and acquisitions can give you the opportunity to enhance skills applicable to many sectors.
Bigger exit opportunities — You can move to Hedge Funds, Private Equity Firms, Corporate Developments, or Venture Capitals. You can even move to another department at your bank.
Growth potential — Unlike most industries that tend to be affected by economic conditions, the healthcare sector usually continues to grow despite what the economy is like. The fact is people always require healthcare, and healthcare companies continue to require funds for enlarging and diversifying their pipelines.
A career in the healthcare investment banking field is worth considering. Maybe you have been trying to figure out if this field is right for you. This article should help you decide.