McGuireWoods hosted its 7^th Annual Healthcare and Life Sciences Private Equity & Finance Conference last month in Chicago, IL. With over 250 attendees, the conference was an opportunity to gauge the temperature of the current deal-making environment in healthcare and Life Sciences. A few observations from the event, the panelists and the attendees:

• Increased in Activity in 2010. The first clear observation is that most deal makers, including the private equity fund professionals and investment bankers expect 2010 to see a relatively brisk increase in deal activity. According to a William Blair report, healthcare saw only 157 private equity deals in 2009, compared to 180 in 2008 and 241 in 2007. Brian Scullion of William Blair, sighted strategic buyers as a likely continued source of deals in 2010 due to the increased needs of strategics to find revenue growth. 

• Focused Diligence Is Key to Success. Many panelists described the dangers of investing in healthcare and life sciences if not done properly. Focused due diligence and use of industry experts can help avoid disasters and ensure that deals are structured properly. 

• Healthcare Reform Will Not Discourage Investment. Following the heels of the Scott Brown win in Massachusetts, some speculation that Healthcare Reform will not be finalized in the form previously anticipated appeared to give many attendees and panelists encouragement in that it would not have an adverse impact on potential investments in the healthcare and life Sciences sectors. Although some sectors (i.e., specialty hospitals) viewed negative impact from healthcare reform as inevitable, certain others, such as medical devices and outpatient services, do not appear to be headed towards in any significant changes in their business.

• Growth Companies. We were pleased to have 16 different growth stage companies present at the conference. These included PerkSpot, Pathfinder Health, Nephroceuticals, Advanced Life Sciences and a variety of other companies that are seeking capital and opportunities for growth. It is always encouraging to see the excitement of entrepreneurs and managers of growth-stage businesses. If you did not have an opportunity to attend the conference and would like to be introduced to any of the presenting companies listed here, please contact Krist Werling at kwerling@mcguirewoods.com or Amber Walsh at awalsh@mcguirewoods.com.

• Strong Companies Can Survive and Thrive. The final theme from the conference was that strong companies with “quality” earnings are surviving and thriving during this economic downturn. These companies have focused their efforts on strictly managing costs and improving revenues during this downturn. For example, Brad Wilsted, of Blue Ridge Capital, described how many companies can focus on same store growth during this time to improve revenues while not spending excessive amounts of money on marketing or other costly initiatives. According to the keynote panel, which included speakers such as Ned Villers from Water Street Healthcare Partners, these strong companies are still seeing good valuations when approached by potential private equity investors.