finance


Sector Spotlight: healthcare services writes Fardeen Nariman, director, corporate finance, Quantuma


Background


Global healthcare expenditure is increasing at an unprecedented rate and is projected to exceed $10 trillion by 2022.


This growth is as a result of a combination of economic, financial and social factors. Ageing and growing populations, better diagnosis of chronic diseases, rising labour costs and advances in innovative technologies are all contributing to increased healthcare demands as well as expenditures. This has put an undue amount of strain on healthcare providers and local authorities.


While stakeholders look to innovative technologies and more efficient means of healthcare delivery, the sector remains attractive for investors and continues to see high levels of deal activity globally. The search for alternative revenue sources is fostering horizontal as well as vertical integration. This is evidenced by the fact that over £1.5 billion worth of investment was poured into this sector in 2018.


As specialists in lower to mid-market healthcare services transactions, we look at the continued growth in this sector as well as the opportunities this brings to those looking to buy, sell or transact.


Outlook


Over the last few years, deal activity in the healthcare sector has been steadily rising with 15% of all European deal activity


taking place in this sector. More specifically, M&A in the care home sub-sector has been buoyant. Occupancy rates have been growing and reached 89% across the UK in 2018 while average weekly fees reached £773, driven by the increase in life expectancy and a reduction in the number of beds due to closures. The defensive characteristics of the sector and long-term income, combined with the fundamental strength of the occupational market, makes the care home sector appealing to those investors wishing to diversify their asset portfolios.


Active investors into this market have included private-equity buyers, trade players, property companies, real-estate investment trusts and niche funds. Increasingly, operators have been looking to release equity via sale and lease back transactions or by selling the freehold and entering into a ground rent contract. By selling the freehold interest on a portfolio of homes, operators can release crucial funds for repaying debt or reinvesting in their businesses.


Making accurate predictions on operating performance in the current political and economic climate can be tough. However, we believe that the care home sub-sector is least affected by the impact of Brexit, instead driven by domestic pressures and favoured for its long income streams. The level of overseas interest in this market continues to grow and is a particular source


of encouragement. The biggest barrier however will be insufficient investment opportunities.


Restricted opportunities should also lead to increased interest in broader healthcare segments such as adult supported living and childcare.


So, what does this mean for the future of healthcare services?


Put simply, the fragmented nature of the sector continues to drive market consolidation and both horizontal as well as vertical acquisitions continue with the aim of producing new revenue streams. Investment in health technology continues to grow and is expected to reach $280 billion by 2021.


Our expertise


The team at Quantuma have been instrumental in completing a number of transactions across the healthcare services sector and have specific expertise in helping owners, operators and investors meet their long-term objectives. If you or a client are looking to grow, dispose, raise capital or release equity in this sector, we would be delighted to share our expertise and experiences with you.


Fardeen Nariman 07500 372070


fardeen.nariman@quantuma.com quantuma.com


CARE SECTOR BRIEFING


Join Quantuma, Coffin Mew and Christie & Co for an informal update and Q&A looking at tackling current issues facing the care sector.


London: Institute of Directors, 16 Pall Mall, London Tuesday October 1st 2019 08.30 - 10.30


Winchester: Brendoncare, Otterbourne Hill, Winchester Wednesday October 9th 2019 8.30 - 10.30


To fi nd out more and register, visit: www.quantuma.com/events


THE BUSINESS MAGAZINE – SEPTEMBER/OCTOBER 2019


businessmag.co.uk


47


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52