A lot of banks, from boutiques to bugle brackets, seem to specialize in certain industries; they have different “heavy hitters” depending on the experience of their MDs, past blockbuster deals that make the front page of the WSJ, balance sheet capabilities, or in some cases, just riding their prestigious brand name to the front of the pack. However, if there were to ever be one group that was ubiquitously in the top half of most banks, it would likely be healthcare. Now, this might sound a bit counterintuitive; after all, capitalism teaches that there must be some winners and losers across every team. However, the information below can hopefully give some information in regard to how healthcare tends to be a great opportunity across multiple teams. I would like to note before proceeding that most of this article pertains to the United States healthcare system and its related economics.
Healthcare is a HUGE Sector. Obviously, the bigger the pie, the bigger your chance of getting to take a sweet, large piece of that pie; luckily for those of you who are interested, this is the case for healthcare in America. First and foremost, healthcare represents over 20% of the United States’ GDP, and hospitals, drugs, medical insurance, and pharmaceuticals are among the largest subsectors within America. This provides numerous investment banks and private equity firms with the opportunity for a decent chance to compete for deals and investment opportunities, respectively.
Believe it or Not, The Risk of Regulation is Actually Pretty Low Relative to Other Industries: First and foremost, healthcare represents over 20% of the United States’ GDP. If a public healthcare system were to be put in place, this would greatly affect employees in the private healthcare sector, particularly in the 12+ states where the healthcare industry is the largest sector in terms of the number of individuals employed. Additionally, many investment banks, venture capital firms, and private equity institutions earn a significant portion of their revenue by consolidating and/or providing funding to numerous corporations within the healthcare sector; if these public regulations were to be put in place, many of the aforementioned entities would suffer significant losses. As of January 2020, ~2,814,000 Americans are employed in the insurance sector, providing insurance services to all but ~8.5% of the nation, and while not all of these workers specialize in healthcare, it can be reasonably assumed that at least a decent portion of these individuals would be adversely affected by the introduction of universal healthcare. Just like with other industries, the government will typically only get involved with deals if they are EXTREMELY large in nature, and excluding pharmaceuticals, the vast majority of this deal activity takes place within the middle market.
Certain Parts of the Sector are Very Resilient to Economic Turmoil: It is a common misconception that all of the healthcare industry is resilient to adverse economic environments, but this only applies to some sectors due to how focused on equity the space is. For example, many early-stage healthcare platforms can find themselves in hard times once the overall economy begins to decline, but spaces like insurance, healthcare technology, pharmaceuticals, and medical devices can power through a great deal of downturn and decline.
You Will Get Experience Across a Wide Array of Products: Although I previously stated that a lot of the healthcare space is based on equity, and while this certainly holds true for a vast majority of the space, the products that you are working with can greatly vary across the verticals that you choose to focus on. Healthcare information technology (HCIT) and biotechnology are specifically focused on equity, with lots of early-stage growth investments and private placements; in contrast, large-cap pharmaceuticals and some medical technology companies are more focused on debt and its associated products. M&A tends to be pretty consistent across spaces and tends to follow the general trends of the overall economy and the broader healthcare sector. Simply put, if you choose to work in a healthcare group, you will find yourself with a vast array of opportunities to develop your skillsets and specialize in the products that you so choose, provided that you can be an adequate junior resource for your bank. This can really help you with a “choose your own adventure” type of scenario when it comes to your first few years in finance; essentially, you can outline the products that you would like to work with and align yourself accordingly.
With Great Optionality Comes Great (and by that I mean Brutal) Hours: Once you start talking to analysts, associates, and investment banks and buyside firms, you will find that a common theme among healthcare juniors is that they’re overworked. From a common sense standpoint, pretty much everyone in “high finance” is overworked, but healthcare groups in particular have a very large habit of getting crushed like a bug. Take a step back and think about it for a second—usually “downtime” isn’t a great thing in finance—typically slower times correlate with weaker deal flow, and often finance employees will find themselves laid off when things begin to cool off. However, healthcare rarely experiences these slower times due to the inherent diversity of its products and scope. This, in turn, means that you won’t find yourself with a lot of time to yourself, which can create complications when it comes to finding time to unwind, exercise, or adequately prepare for recruiting (although the great resources here at OfficeHours can help mitigate that!). Although a lot of young finance upstarts love to act like the hardest workers and biggest grinders in the room, this is something that you might want to consider before taking a nosedive into America’s largest industry.
Best of luck! To an outsider, it might seem as though healthcare is an extremely complex and unnavigable industry, and although it can be more complex than other industries initially, it can also serve as your springboard to your target buyside or corporate role in the future.
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