In this article RAMESH JASSAL, director of healthcare market intelligence at mid-market advisory firm, Clearwater Corporate Finance, discusses investment trends in the UK healthcare market and how looking to private investors can help the industry to combat the pressures it faces
A strong flow of transactions in the domiciliary care, primary care, care home and specialist care area boosted the sector and showed that the market remains an attractive one
2013 saw UK deal activity in the healthcare sector maintain the performance of the previous year. In particular, health and social care was one of the stronger-performing sub sectors in healthcare, with investors continuing to deploy capital in this area that will support new healthcare models that can meet the current challenges in the market and new outsourcing opportunities, and via additional bolt-on opportunities to their existing investments, which are focused on consolidating their position in this tough market.
81 health and social care deals were completed in 2013, down only marginally from 83 the previous year. This accounted for 64% of all M&A activity in the wider UK healthcare industry. A strong flow of transactions in the domiciliary care, primary care, care home and specialist care area boosted the sector and showed that the market remains an attractive one. The appeal of the specialist care sub-sector was typified through a number of transactions: Caledonia Investments acquired Choice Care Group from Sovereign Capital for £86m; Voyage Care acquired Independent Living Group (ILG) for an undisclosed amount; and Lyceum Capital invested in Curocare for an undisclosed amount in June.
The wider healthcare IT market also remained active, one significant deal being the acquisition of clinical software supplier, Ascribe, by primary care systems supplier, EMIS, for £58m. The deal was the largest yet for EMIS and strengthened its position in the general practice and clinical software market.
As the NHS continues to grapple with budget cuts and growing patient expectations, private investment will increasingly become the solution to delivering high-quality care in the UK
The biggest deal in the UK market last year saw the US Griffin-American Healthcare Real Estate Investment Trust (REIT) II acquire 44 elderly care properties from Myriad Healthcare for £298m. Founded in 1994, Myriad is one of the largest operators of senior residential care homes in the UK. With banks still facing lending restrictions, care home developers and providers with high levels of gearing have also been seeking alternative sources of financing. Hence, this has resulted in new types of capital, such as REITs being brought to the market.
We expect 2014 to see more investment from healthcare REITs and other debt for equity swap specialists in high-quality tier one elderly care properties, especially in those properties that are future-proof and have a high concentration of self-pay residents.
As the NHS continues to grapple with budget cuts and growing patient expectations, private investment will increasingly become the solution to delivering high-quality care in the UK. This is best illustrated by the turnaround seen at Hinchingbrooke in Cambridgeshire, the UK’s first privately-run NHS hospital. Hinchingbrooke, for years plagued by poor performance and financial woes, has witnessed a significant improvement in patient care since being taken over by Circle Holdings and hopes to break even this year.
What matters is simply how the best healthcare is delivered and where to find the best people to make that happen as the market builds upon the experience and knowledge it has gained from the private sector
The debate of ‘private versus public’ is now a rudimentary one. What matters is simply how the best healthcare is delivered and where to find the best people to make that happen as the market builds upon the experience and knowledge it has gained from the private sector. As the market continues to recognise that private investment can offer another alternative, we will begin to see a climb in deal value and volume across the board this year.
