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What is Healthcare Investment Banking?

 | 
June 4, 2021
UPDATED: 
June 15, 2021
What is Healthcare Investment Banking?

You must have heard of different types of banking, but have you ever wondered: what is healthcare investment banking? Well, if you are hearing this term for the first time in your life, this blog will help you understand what it is and its importance in healthcare innovations and advancement. 

Healthcare investment bankers advise healthcare companies regarding the biotech, pharmaceutical, medical device markets on mergers and acquisitions. However, what sets healthcare investment bankers apart from other bankers is that they work exclusively with the healthcare industry. The team of bankers executes all types of transactions. Within the healthcare market space, this team creates a unique experience for these banking professionals. It requires an understanding of both finance and medicine to be successful at their job.

Most healthcare companies fall into one of two broad categories:

  • Pharmaceuticals, Biotechnology, and Life Sciences – This category includes companies that manufacture branded (patented) and generic drugs derived from living organisms or chemicals. It also includes companies that provide the tools necessary to support the manufacturing processes.
  • Healthcare Equipment & Services – This category includes hospitals, assisted living and nursing facilities, laboratories, managed care facilities, and medical device manufacturing companies.

Many healthcare companies provide the “essential services” whose demand is relatively inelastic – this means even if there's a recession, people with medical needs will still need to go to the hospital and see a doctor. This sector of business has been heavily regulated by governments, and for a good reason. There is a chance that greedy corporations with deep pockets can pounce on the companies operating within this sector for the enormous profit potential they have. These regulations have historically tightened during periods when economies are struggling, so cheap and affordable healthcare is always within reach of the ordinary person. 

A few dozen enormous public companies account for most of the deal-making activity within this highly competitive industry. But a small amount of share is made up of many small-cap private companies or new ventures. The big fish can acquire these private firms as businesses attempt to diversify amid the ever-changing market situation where regulation - both nationally and internationally - continues its upward trajectory.

U.S.-based firms also account for an unusually high percentage of the total global market cap worldwide. This high percentage of the global market is also prominent within the healthcare information technology (HCIT) space. HCIT can also be grouped with the Equipment & Services category or Healthcare Insurance Providers.

We hope you now have a good idea about healthcare investment banking and the critical role these specialized bankers play to keep healthcare affordable for you and millions if not billions of other people like you. We’d love to hear your thoughts on this post, so do give us a shout-out in the comments section.

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