July 10, 2018 Finance

Healthcare continues to see high levels of M&A and investment activity

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Healthcare continues to see high levels of M&A and investment activity with 65 deals completed in H1 2018

The first half of 2018 has seen M&A and investment activity in the UK Healthcare sector remain high, according to data from Alantra, the global investment banking and asset management firm.
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Healthcare continues to see high levels of M&A and investment activity with 65 deals completed in H1 2018

Strong underlying market drivers have whetted investor appetite and pushed valuations for premium healthcare assets –

10 July 2018 – The first half of 2018 has seen M&A and investment activity in the UK Healthcare sector remain high, according to data from Alantra, the global investment banking and asset management firm. The first six months of the year saw 65 deals, compared to 83 during the same period last year and M&A momentum is expected to continue for the second half of 2018, as a result of favourable market drivers.

Justin Crowther, a Partner in the UK advisory business of Alantra and a leading adviser to the Healthcare sector, has identified the following significant healthcare deals and market drivers that have positively impacted M&A activity in the industry during the first half of 2018.

Strong private equity appetite for market-leading platforms

Core Equity, the Belgium-based private equity firm, acquired Portman Dental Care following a competitive dual track process involving serial acquirers such as Jacobs Holdings. Core Equity recorded the highest first-time fundraise in 2017. It has c.€1bn of capital to deploy in market-leading platform companies with substantial opportunities to generate value over long periods of time through organic and inorganic channels. Portman’s strong reputation, geographic positioning and ability to access an extensive clinical network embedded in the UK private health system aligns neatly with this investment philosophy. Portman offers an attractive opportunity for further consolidation within the UK, whilst potentially providing a launch pad to create a pan-European market leader.

UK market access remains a high priority for international acquirers

Virtus Health Group (Virtus), the listed Australia-based provider of in-vitro fertilisation services, continued its international growth strategy with the acquisition of Complete Fertility (90% stake). The UK fertility market is of key strategic importance due to its strong international healthcare reputation, well-regulated market and the ability to implement the most advanced treatments by combining recent advancements in technology with unparalleled scientific capability. The fertility services market, underpinned by favourable market drivers, remains a hot-bed of activity and we expect this trend to continue as international acquirers look to capture incremental market share in carefully selected global markets.

Specialist care market attracting a new breed of institutional investors

Antin, the specialist infrastructure fund, followed up its recent investment in Kisimul Schools with the acquisition of Hesley Group, the specialist residential care service provider for adults and young people with autism and other complex needs. Infrastructure funds are increasingly looking towards the fragmented specialist care market as a source of non-cyclical growth that will generate stable cash returns for investors, as well as longer-term opportunities to maximise asset base values. Other notable investments by infrastructure funds include AMP Capital’s acquisition of The Regard Partnership and Montreux Capital’s investment in Active Assistance.

Enhancing capabilities is a core driver of veterinary service M&A activity

H1 2018 has seen the emergence of new corporate players willing to compete in the European veterinary service market. Mars Petcare has stood out as the front runner, acquiring Sovereign-backed Linnaeus Group, the UK-based referral-led hub and spoke veterinary care provider and AniCura, Nordic Capital’s veterinary platform. Increasing levels of humanisation, the non-discretionary nature of spend and rising pet ownership levels are underpinning strong growth for veterinary services businesses. Trade, financial investor and debt lenders’ appetite shows no sign of slowing down and competition for the best assets continues to intensify.

Increasing number of social care M&A transactions

Domiciliary and elderly care providers, especially those funded through local authorities, remain exposed to a difficult operating environment. Government austerity measures combined with the introduction of the National Living Wage are placing significant pressure on margins resulting in a slowdown in M&A activity in this space. However, the acquisition of the domiciliary care business Ark Home Healthcare by City & County is a signal of intent by a key strategic buyer in the field – is this an early indication that social care M&A activity is on the up?

www.alantra.com

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