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Private Equity Opportunities Abound in Health Sector, Top Banker Tells Global Business Forum

January 13, 2011
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James Forbes offers advice to participants during lunch keynote
session.

Health care is underweighted among private equity companies’ holdings, James D. Forbes, the head of Global Principle Investments at Bank of America Merrill Lynch, told participants at the University of Miami’s Global Business Forum on Thursday.

Forbes offered advice about new financial opportunities in the health care sector to more than 600 participants at the forum, titled “The Business of Health Care: Defining the Future” and organized by the School of Business. They were gathered in a large tent on the Edward T. Foote II University Green to hear Forbes speak during lunch.

Because health care is underweighted, “it’s an industry where you’re going to see a lot of buyout activity over the next few years,” Forbes told the crowd. He added that despite a historically low 4 percent growth rate, the sector is strong. One sign of that strength: Last year saw no major health care firm buyouts caused by to bankruptcy. Forbes predicted private equity investors would engage in at least one health care company buyout valued at $5 billion this year.

One reason Forbes is bullish about the health care sector is last year’s controversial federal health care reform legislation, which has created “tremendous opportunities” for private equity firms. “Health care reform is not going to be repealed,” Forbes assured. “It’s not going to happen, folks. That’s the political reality.”

That means that at least 36 million more people in the U.S., most of whom don’t even have a regular doctor, will be seeking all kinds of basic medical services because they have health insurance for the first time. “We need to create primary care physicians, a lot of them in a hurry,” Forbes observed.

Also fueling Forbes’s optimism is the “demographic wave” of the Baby Boom generation, the first of whom turn 65 this year. Private equity investors are well aware of studies showing that people 65 and older start consuming two-and-a-half to three times more health care than younger folks, because of chronic conditions like diabetes, hypertension and heart disease.

Investors should keep in mind that nearly half of all health care expenditures come from just 5 percent of the population, Forbes said. Thus, promising new investment targets lay ahead — especially in managed care, acute care, home health care and medical devices such as stents and artificial joints that will keep Baby Boomers active. “I think the opportunity over the next five to 10 years exists in finding the companies that can address that 5 percent,” he predicted.

Forbes was introduced by an expert in health sector private equity opportunities: UM Trustee Mike Fernandez, a successful health care entrepreneur who is chairman of private equity firm MBF Healthcare Partners.

The three-day Global Business Forum featured some of the world’s most prominent health care industry thought leaders. In addition to the keynote addresses, the Forum included more than 30 panel sessions organized in six tracks, including economics and health care, aging, innovation, wellness and prevention, global health issues and hospital design, technology and delivery systems of the future.

The Forum's key sponsors included BlueCross BlueShield of Florida and Bank of America Merrill Lynch.

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