The healthcare market has proved to be more encouraging than other sectors for deal activity in the post recession years. 2012 looks like it will continue the trend.
A run of deals including Terra Firma’s £825 million buyout of Four Seasons, August Equity LLP’s investment Active Assistance acquiring Communicare, Capital’s £60 million acquisition of Care Fertility from General Healthcare Group and Virgin Care’s acquisition of the £450 million community services in Surrey, is helping commentators to feel more upbeat about deals in the private healthcare sector.
Perhaps counter-intuitively, potential investors are treating as positive news the increasingly widespread view that the economic forecast is unsettled at best. Acceptance that there is not going to be a hockey stick recovery has meant that at the same time as a number of the UK’s biggest healthcare services are searching for solutions to satisfy debt piles and many private equity houses need to find exit routes, asset pricing is becoming more realistic. The net result is the perception that there are now many more attractive investment opportunities.
A recent prediction by KMPG singled out the UK healthcare market as the “rare bright M&A spot” in an otherwise “gloomy global market”. According to Catalyst Corporate Finance, “good businesses are still attracting healthy multiples” with Adrian Yurkwich, head of the healthcare team at Silverfleet Capital, predicting that “secondary deals will dominate the mid-market again in the second half [of 2012] as owners look to sell good assets in a market short of quality opportunities”.
Who then is looking to strike while the iron is hot? A number of large corporates such as Voyage, Care UK, AmSurg and Australian hospital operator Ramsay, look like they have the necessary resources and the commercial drive to expand through acquisition. These larger corporates will sit alongside the likes of August, Bowmark, Sovereign and other mid-market private equity houses with specialist sector knowledge in domiciliary care and care in the community. Finally, there are some players driving property activity within this sector, with firms such as PHP, MedicX and Assura reported to be continuing their drive to buy up primary care assets.
So what does all this mean? There is a growing consensus in the industry that, competition commission concerns, NHS reform and the wider economic climate notwithstanding, 2012 is notable for a strengthening sense of confidence in the sector.