For years, software was private equity's preferred hunting ground: it offered consistent, recurring revenues, strong margins and seemingly predictable growth. The rapid rise of AI has created uncertainty around software valuations and exits. In contrast, healthcare demand continues to be driven by forces that are both measurable and persistent - ageing populations, rising rates of obesity, diabetes, cardiovascular disease and cancer, and growing pressure on healthcare systems globally. From Europe and North America to parts of Asia, the same trends in disease burden and demographics are emerging, creating a degree of demand that only a select few sectors can match.

AI is making software harder to value

As artificial intelligence continues to develop at an unprecedented pace, investors are reassessing the durability of software business models and the valuations attached to them.1 The concern is not that software is becoming unneeded, but that future winners are becoming harder to identify.

This uncertainty is already affecting exit markets. Visma, the European accounting software company backed by Hg, considered delaying its planned London IPO as the broader software sell-off deepened.2 While the company remains a valuable asset, the debate around its valuation highlights a wider challenge for investors.

For an industry built on forecasting future cash flows and exit values, uncertainty itself has become a risk. As software becomes harder to value with confidence, investors are starting to look more closely at sectors where demand is easier to forecast over a long horizon.

Healthcare's demand is driven by structural trends

Unlike software, healthcare demand is not driven by technological cycles or consumer preferences. Instead, it is underpinned by demographic and epidemiological trends that are measurable.

The most significant of these is population ageing. According to United Nations projections, the global population aged over 65 is expected to increase from 761 million in 2021 to 1.6 billion by 2050, before eventually reaching 2.2 billion in the late 2070s.3 By that point, the number of older adults will permanently outnumber children under the age of 18. As populations age, demand for healthcare services, diagnostics and long-term care is likely to increase in step.

At the same time, the burden of chronic disease continues to grow. Global obesity projections suggest that by 2050, around 60% of adults and over 30% of children and adolescents could be living with overweight or obesity.4 Diabetes prevalence is also rising, with the number of adults living with the condition forecast to increase from 589 million in 2024 to 853 million by 2050. Alongside this, global cancer incidence is projected to rise by more than 75%, with more than 30.5 million new cases expected annually by mid-century.5

Data caveat: These figures are long-range projections drawn from UN, epidemiological and public-health modelling. They depend on assumptions about fertility, mortality, behaviour and policy that may shift over time, and should be read as indicative of direction and scale rather than precise forecasts.

What makes these trends attractive from an investment perspective is their predictability. While the long-term impact of AI on software business models remains uncertain, demographic change and disease burden can be forecast decades in advance. For private equity firms seeking clarity, healthcare offers something increasingly scarce: growth drivers that are already visible today.

Private equity is already acting on the opportunity

Across private markets, firms are already deploying significant capital into the sector and positioning themselves around long-term demographic and healthcare trends.

A recent example is the merger between GHO Capital and CBC Group, creating what the firms describe as the world's largest dedicated healthcare investment manager, with more than $21 billion in assets.6 The transaction combines one of Europe's leading healthcare investors with Asia's largest healthcare-focused asset manager, creating a platform spanning North America, Europe and Asia-Pacific. The scale of the deal reflects growing confidence that healthcare is an attractive destination for long-term capital.

This trend extends beyond investment managers. Healthcare providers are also pursuing expansion strategies in response to rising demand. In Saudi Arabia, Aster DM Healthcare recently acquired a majority stake in ProCare Hospital as part of a broader strategy to extend its presence in the Kingdom.7 The acquisition highlights how healthcare operators are positioning themselves to benefit from growing healthcare spending, population growth and increased demand for care.

What makes healthcare particularly attractive from an M&A perspective is not only its demand outlook but also its market structure. Many healthcare subsectors remain highly fragmented, with independent clinics, specialist providers and healthcare service businesses operating at relatively small scale. This creates opportunities for buy-and-build strategies, allowing investors to consolidate providers, improve operational efficiency and create larger platforms capable of serving growing patient populations.

Alongside investment, programmes such as the NHS Clinical Entrepreneur Programme have contributed to a broader healthcare innovation ecosystem, helping bridge the gap between clinical practice, entrepreneurship and capital allocation. This helps expand the pipeline of healthcare businesses available for future investment and consolidation.

Healthcare is not without risk

Healthcare's long-term demand outlook does not make it immune to risk. Regulatory changes, reimbursement pressures and persistent workforce shortages can all affect profitability and growth.

However, unlike the uncertainty surrounding AI's impact on software valuations, these challenges are generally well understood and have existed within the sector for decades. For investors, the question is rarely whether demand will exist, but which businesses are best positioned to meet it.

That contrast, between a sector whose winners are becoming harder to identify and one whose drivers are already visible, may prove to be the defining feature of the next investment cycle.

Footnotes

  1. FRP Advisory, 'SaaS Valuations Have Reset: The Rules Are Changing' (opens in a new tab). ↩

  2. Dealroom, 'Visma May Delay £19bn London IPO as Software Sell-Off Deepens' (opens in a new tab). ↩

  3. United Nations, 'Ageing' (opens in a new tab). ↩

  4. The Lancet (opens in a new tab), 'Global, regional, and national prevalence of adult overweight and obesity, 1990–2021, with forecasts to 2050: a forecasting study for the Global Burden of Disease Study 2021'. ↩

  5. PubMed (opens in a new tab), '11th edition of the IDF Diabetes Atlas: global, regional, and national diabetes prevalence estimates for 2024 and projections for 2050'; The BMJ (opens in a new tab), 'Cancer deaths expected to reach 18 million by 2050, major study forecasts'. ↩

  6. GHO Capital, 'GHO Capital and CBC Group to Create World's Largest Dedicated Healthcare Investment Firm' (opens in a new tab). ↩

  7. Gulf Business, 'Inside Aster's Latest Saudi Growth Strategy: ProCare Deal Signals Bigger Healthcare Expansion Ahead' (opens in a new tab). ↩