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Investment activity holds strong in healthcare

Peter Jennings Peter Jennings

At a time when many other sectors are experiencing a great deal of uncertainty, healthcare remains an attractive option for investors. The nature of the continued and increasing demand on both private and public services presents relative stability, as well as favourable long-term growth dynamics.

In particular, the UK’s ageing population is providing more and more opportunities. In fact, according to projections by the Office for National Statistics, there are likely to be an additional 8.6 million people aged 65 years and over by 2066.

We expect to see continued interest in fund investment, be that real estate investment trusts (REITs), infrastructure funds or investment funds, from both domestic and international buyers. While remaining challenged, the government funded part of the market has seen an increase in the National Living Wage and also some increases in local authority funding.

Long-term social care

Several recent acquisitions in the specialist care space highlight the enduring appeal of long term, low-risk ventures to institutional investors and REITs. In particular, our recent sale of TLC Care Homes, a specialist provider of residential and supported living care, to a REIT investor.

The elderly care market is on the verge of experiencing some large deal activity, with Barchester Healthcare in process and the direct holding companies of Four Seasons going into administration at the end of April.

The growing affluent retiree demographic presents varying opportunities for mid-tier care homes and retiree living, as individuals and relatives look for more luxurious and consumer-focused community and care environments.

The same is true for home care, which has experienced considerable activity in recent months, with the sell-off of Aurelius’ Allied Care contracts to Healthcare Resourcing Group (CRG) following the CQC’s announcement that Allied would no longer be able to service its debt.

Many local authority funded home care operators are struggling, but those with a substantial private-pay customer base and a high acuity offering are generally flourishing as they too attract affluent pensioners looking for an alternative to residential care.

Retail healthcare

A large amount of activity in the retail healthcare market is currently being generated by the dental and fertility sub-sectors. As mid-tier dental groups look to reinforce their market positions, competing with the likes of Bupa and Portman, we expect to see an uptick in consolidation. Indeed we advised investment in Alpha Vitality by Riverside Healthcare backed by Apposite Capital demonstrates such activity.

In the IVF sector, 2019 has seen both the Fertility Partnership and private equity backed Care Fertility come to market as their owners looked to realise their investments. It will be interesting to see how these transactions shape the domestic and European landscape as Care Fertility went to Silverfleet Capital, and Fertility Partnership was acquired by Sweden based Implio, demonstrating continued interest in the sector from both private equity and also international investors.

Healthcare is an ever-evolving market that is likely to remain highly attractive to investors, due to an increase in demand, specialisms and compliance all driving consolidation.

Read more about our latest healthcare credentials and more in our annual Leading the way. If you’re considering strategic options for 2019 and beyond, please contact Peter Jennings.

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