Healthcare services market sees highest levels of M&A activity since 2016
Alantra identifies the key trends underpinning the highly acquisitive healthcare services market in 2019
The volume of deals in the healthcare services sector is at its highest level since 2016 according to Alantra, the global mid-market investment banking firm, with 88 deals (excluding pharma and medical devices) completing in the first half of 2019. H1 2018 saw 69 deals (153 for the full year), while 98 deals completed in H1 2016.
Justin Crowther, Partner at Alantra and a leading adviser to the Healthcare Services sector, commented: “Specialist services are typically fragmented and underpinned by strong market growth. They continue to attract investment, with private equity and strategic acquirers competing for assets and this is in turn creating strong opportunities for business owners and management teams.”
Justin Crowther identified the following key trends underpinning the acquisitive healthcare services market in H1 2019:
• Rising interest in home healthcare
“The social care market is facing inescapable pressure from evolving demographics. Commissioners are continually looking for new solutions, with the optimum situation being able to care for patients effectively in the home. Businesses offering personalised, affordable and clinically-led care solutions in the home are strongly placed with well-invested platforms to accelerate growth and become the partner of choice for local authorities, the NHS and self-pay individuals desiring greater independence.”
“This year, we have seen high quality UK businesses such as The Good Care Group (TGCG) successfully attract the attention of international buyers. Sodexo, the international facilities management group, acquired the business to expand its live-in care operations in the UK and to offer home care solutions to consumers with complex care needs.”
• Competition for specialist care assets is rising
“The need for quality, specialist care is being propelled by the UK’s growing population and the significant, and increasing, demand underpinning high occupancy levels in high-acuity and niche services. This demographic pressure has started to shift power to providers as commissioners frequently struggle to find suitable local placements.”
“With the combination of demand drivers, regulatory developments and often attractive margins, children’s services remain marketable and competition for assets in this sector is increasing. There are a number of private equity-backed businesses looking to secure incremental revenue and profit through M&A while enhancing and expanding services available to payors and end users.”
• High M&A activity continues in fertility services with proven opportunities for consolidation and international expansion
“Demand for fertility services is rising significantly as fertility rates continue to fall. We expect high M&A activity to persist as businesses that offer personalised, transparent, effective and flexible treatment plans using the latest scientific and technological advancements will continue to whet institutional appetite.”
“A number of recent private equity-backed UK IVF clinic chains have proven the compelling opportunity for buy and build and international expansion, and this has in turn created significant deal momentum. This momentum extends into adjacent fertility services such as monitoring technology, where we have seen increasing levels of investment this year”.
• Private equity-backed dental practice consolidation continues
“The dental care operating environment remains ‘hot’, driven primarily by active trade buyers (such as Bupa) and significant amounts of dry powder for healthcare service multi-site businesses. Private equity has also been active in this space with recent deals such as G Square Healthcare Private Equity’s acquisition of UK-based Dental Care Group demonstrating the opportunity for value creation through organic growth, differentiation of service offering and execution of a successful buy and build strategy. It is now not unusual to see European dental deals with pricing at 15x EBITDA and above.”