Who gets the most impact for their buck?

• Impact investing has grown rapidly over the last decade – but impact investors should be mindful of to what extent tangible impact can really be achieved.
• Unlike with publicly listed companies, Private Equity investors can take a much more active role in their companies.
• By shaping the product and commercial strategy of healthcare companies at the early stage of the product development process, Private Equity healthcare investors can deliver tangible impact in underserved markets.

Impact assets have grown rapidly over the last decade and Impact funds had over $1.5 trillion in AUM in 2024 - an annual growth rate of 21% over the last five years¹ . Unlike traditional investing, Impact investing measures success not just by profit but also by the tangible benefits created for society and the planet. Healthcare investments is a logical choice for Impact investors as it can generate tangible solutions to urgent global health needs, such as affordability and access to quality healthcare (learn more about how we do this in our previous insight). But how can investors make sure that their investments generate the most impact possible? 

The growing healthcare Private Equity market

The Private Equity (PE) healthcare market has grown significantly in recent years. In 2024, global healthcare PE deal value reached an estimated $115 billion, the second-highest total on record² .

The active role of Private Equity investors

PE and listed equity each offer varying degrees of control and influence over the companies they invest in. In public equity, shareholders may exercise voting rights at annual general meetings, but their ability to effect change is often minimal unless they hold a substantial portion of the company's shares. Conversely, PE investors acquire significant – often majority – stakes in privately held companies, granting them substantial control over strategic and operational decisions.

PE investors are able to actively engage in shaping the company's direction – for example through a board seat – and implement value-creation strategies and driving performance improvements.

On the product side, PE investors can deliver impact in two key ways;

• Streamlining operations, renegotiating supplier contracts and implementing leaner manufacturing techniques to reduce costs and improve profit margins - which can help reduce the price point and make the product more accessible.
• Prioritizing global mass markets –  not just high-income markets – in product development and commercial strategies along with adopting more sustainable practices, enhancing labour conditions and engaging in community initiatives.

Influence on commercial strategy

We see three key ways PE investors can deliver impact through the commercial strategy;

• Centralising procurement processes and leveraging economies of scale, resulting in cost savings and improved supply chain efficiency.
• Expanding the market reach by entering new geographical markets, diversifying the customer base, opening new distribution channels, or pursue strategic partnerships.
• Influencing companies to develop products or services that better address social needs, thereby creating positive societal impact while tapping into new market opportunities.

Private Equity Investments in Healthcare: Early-Stage vs. Late-Stage

The healthcare sector is a good example of where PE investors can generate tangible impact, but the level of control and influence on the company depends greatly on what stage the company is in.

Investing in early-clinical stage firms – companies that are at the earliest stage in the drug development process and are testing new drugs to assess their safety and efficacy – allows investors greater influence over strategic decisions including clinical trial designs, regulatory pathways, and initial market strategies. However, these investments carry higher risks due to uncertainties in clinical outcomes, regulatory approvals and market acceptance.

At the other end of the spectrum are late-commercial stage firms. At this stage, companies have established products and revenue streams, resulting in lower-risk profiles. PE investors may have less influence over foundational strategic decisions but can still drive value through operational improvements, market expansion, and optimisation of existing processes.

We consider the late-clinical or early-commercial phase to be ideal, as we can deliver significant change while excluding the riskiest phase. These companies have clinical data that has proven the efficacy of the product, but they are still early enough in the process to allow a PE investor influence on the market and product strategy.