Healthcare PE Deals Are Skipping the Auction Process

TL;DR: Healthcare investors at McDermott Will & Schulte's HPE Europe conference in September said hardly any deals this year have run as a standard auction, per Investors in Healthcare. Processes are longer, more often bilateral, more often broken. If you hold healthcare PE through a fund, your manager's relationships now matter as much as its model.

The trade publication Investors in Healthcare wrote up the panel. It included three members of the European Healthcare Investor Association and was moderated by Fatema Orjela, a partner in McDermott's private equity team.

Orjela set the tone at the start of the discussion. “Compared to any other year, across the value chain, hardly any have involved a standard auction process,” she said.

What did the panel actually say?

According to Investors in Healthcare, the discussion described a market of transaction uncertainty, longer timelines and more frequent broken and bilateral processes. A bilateral process means one buyer and one seller negotiating directly, without a banker running a competitive bid. A broken process is one that starts as a sale and falls apart before it closes.

McDermott's own summary of the panel adds valuation challenges and a shift away from traditional auctions. It says panellists stressed sector expertise, strong relationships and transaction certainty in securing deals. Orjela's advice to investors was short: “Know what you want, be connected to the right people, make those people know what you want, and be able to move when people bring you what you say you want.”

One caveat from me. This was a European conference, and the reporting I could read gives no deal counts or prices, so treat it as experienced operators describing how the market feels, not as a measurement.

Why should an individual investor care about deal process?

Because you pay for it, even if you never see it. Many private funds are open only to accredited investors, and if you hold one through a feeder or platform, this applies to you.

I spent years on a submarine signing off on more than 1,000 QA jobs, and the lesson that stuck was simple: a process you can't see is a process you can't verify. Downside first. When auctions were standard, a fund won by outbidding rivals, so the edge was mostly price discipline and the willingness to walk away from a deal that got too expensive. Now the edge moves toward who gets the call first. That's a judgment about your manager. You can check it.

The capital side points the same direction. Benzinga reported, citing PitchBook's H1 2026 Healthcare Funds Report, that health care PE funds from the 2021-2023 vintages generated a 10.2% pooled IRR, compared with 12% for broader private equity. Rob Larson of Grant Thornton Stax Consulting told Benzinga that slower distributions have left LPs with fewer dollars to recycle into new funds, pushing them toward managers where they have the most conviction.

I read those two stories together. Fewer clean auctions and tighter LP wallets both reward managers with real relationships and a clear thesis. That's my read; neither source says it.

What the sources report	Who reported it	What I'd take from it
Hardly any deals this year run as a standard auction	Fatema Orjela, via Investors in Healthcare	Price discovery is less visible to you
Longer timelines, more broken and bilateral processes	Investors in Healthcare, McDermott	Capital sits uncalled or returns arrive later
10.2% pooled IRR for 2021-2023 vintages vs. 12% for broader PE	PitchBook, via Benzinga	Healthcare is no longer an automatic premium

The common thread is that you see less of the process than you used to, and the return premium has narrowed.

What should you ask a healthcare PE manager now?

Start with how they source. If the answer is “we win auctions,” ask how many of their last deals were actually competitive processes. If the answer is relationships, ask them to name the kind of relationship, such as founders, operators or physician groups, without naming anyone confidential.

Then ask about timing. Longer processes can stretch the period before capital is deployed, which matters for how you read early performance. My guide to the J-curve covers why a fund looks poor in year one, and DPI is the number that shows whether cash has come back.

Common mistakes

The first mistake is reading a headline sector figure as your fund's outlook. Healthcare PE has reached record deal value in a prior year, but record volume didn't buy better returns: the pooled IRR above still trails broader private equity.

The second is judging a manager by deal announcements alone. If fewer deals are public, a quiet quarter may mean nothing, or it may mean trouble. Ask.

The third is skipping the basics. A manager's story about relationships doesn't replace the fee stack, the track record or the terms. Run it through a 12-point fund checklist first.

FAQ

What is a non-standard deal process in private equity? It's any sale that doesn't follow the banker-run competitive auction. In the panel's description, that means more bilateral negotiations and more processes that break down before closing.

Does this mean healthcare PE is a bad investment now? The sources don't say that. They describe a harder market. PitchBook's figures, as reported by Benzinga, show healthcare funds from 2021-2023 trailing broader PE on pooled IRR.

Why do relationships matter more without auctions? If a seller isn't running a competitive bid, the buyer who knows them and can move quickly gets the conversation. Orjela's advice was to be connected and ready to move.

Is this about U.S. or European deals? The panel was at a European conference. The PitchBook figures are for health care PE broadly, so don't assume one market's experience applies to the other.

What to do next

Before your next healthcare fund conversation, write down one question: “How many of your last five deals were competitive auctions?” Ask it, and judge the answer.

If you want more of this kind of read on private markets, the free AIN briefing is where I send it.

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