Armentum Partner’s 2023 Recap
In general, enterprise-value debt markets were open but selective in ‘23 despite broader equity market volatility.
- Underwriting standards were more stringent than 2022, as lenders increasingly focused on cash runway and making sure companies were fully financed through major inflection points (most often cashflow breakeven.
- Many lenders were focused on issues in their existing portfolios, and were less willing to look at new deals.
- Refinancings without a significant stimulus (ie accelerating revenue growth, increased profitability, substantial equity round) became more difficult.
The debt market really started to heat up in November/December 2023.
- Last two Armentum processes were very competitive with multiple bids and attractive terms.
New entrants (Symbiotic Capital, Monroe through acquisition of Horizon), existing funds making bigger push in healthcare (Trinity Capital, Ares) and new/expanded funds for existing players continue to increase supply of capital.
Subsector Overviews
Tech-enabled Healthcare Services – sector was particularly active as lenders felt comfortable adding leverage to companies that were scaling revenues after demonstrating product market fit; HCIT transactions with scale attracted interest from a wide array of lenders.
Biopharmaceuticals – deals were few and far between, with only a handful of premium opportunities coming to market.
Medical device, diagnostic and tools – companies that had large existing loans struggled to refinance /upsize without significant equity support.
2024 Outlook
Many lenders under-deployed in 2023, and are aggressively looking to put capital to work in 2024.
Continued push from global asset managers deeper into healthcare (Ares, Oaktree, BlackRock, Blackstone, among others) will further increase supply / competition for larger transactions.
New deals are being well received – Armentum launched over $500 million of healthcare transactions during the JP Morgan healthcare conference.
Bank market may become more competitive with addition of HSBC to SVB, CIBC, and other existing players – banks likely to be conservative on size but expect them to be aggressive on terms for deals in their strike zones.
Armentum expects market to be quite active, but a state of “haves” and “have-nots” exists.
- High quality opportunities will attract multiple attractive debt options.
- More challenged situations that are unable to raise equity and don’t have accelerating commercial traction will be unable to attract debt capital.
Competition among lenders and declining floating rates will put downward pressure on pricing.
2023 Healthcare Activity
- 17 Deals Closed
- $1.4b Total Transaction Volume
- ~$80m Avg. Transaction Size
- $18 – 400m Deal Ranges
DOWNLOAD ARMENTUM PARTNERS’ 2023 YEAR-END UPDATE AND 2024 OUTLOOK FOR HEALTHCARE DEBT MARKETS REPORT