£20 billion opportunity ahead for the private sector in healthcare
Changes in healthcare policy and pressures on public finances will present major opportunities for private healthcare providers according to a new research report from Catalyst.
The report examines the impact of the changes and potential for mergers and acquisitions in the sector including:
- Trade buyers have renewed capacity for acquisitions.
Stronger balance sheets are allowing management teams to refocus on growth and, with shareholders now more willing to sell than in 2009-2011, this is leading to an increase in M&A. The deal process can be lengthy, complex and due diligence potentially extensive. However, with the right preparation, vendors can achieve fair valuations and complete transactions.
- Mid-market and specialist private equity houses continue to invest.
The private healthcare sector, a large element of which is owned by private equity, dominates delivery of the highly fragmented specialist and domiciliary care sector. Private equity continues to grow businesses in these sectors whilst also looking for new platforms.
- Overseas institutional investors are acquiring UK assets.
Leading pension funds are attracted to healthcare businesses that have scale and stable cash flows, as demonstrated by Ontario Municipal Employees Retirement System’s acquisition of Lifeways from August Equity.
- Significant opportunity for the private sector in primary and secondary care.
The introduction of GP commissioning and interest in healthcare models offering alternatives to hospital care will require a higher proportion of services to be delivered by the private sector. The markets for these services are estimated to be worth around £20 billion. Landmark contracts awarded to Circle, Virgin Care and Serco demonstrates increasing recognition from the public sector that leveraging the private sector’s ability to invest capital and use more efficient delivery models is necessary for the government to reduce costs while improving the quality of healthcare.
Justin Crowther, director at Catalyst and co-author of the report, said: "Despite many challenges, the private sector is increasingly providing healthcare services, whether paid for by the taxpayer or directly by consumers at the point of use. Whether this is to turn around underperforming hospitals, operate GP surgeries, deliver community services or create centres of excellence in areas such as pathology, [NHS] commissioners are increasingly using the skills and capital of the private sector."
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