The last year has seen something like a buyers strike from private equity with a whole range of stalled sales processes.
HBI Intelligence readers can click here to see our predicted deals pipeline.
One of the largest here was Elysium Healthcare, the UK adult care group, which was pulled by BC Partners. But many others are stalled, and it isn’t just prospective sales which have been affected. IPOs such as Diaverium have also been pulled.
There are two problems. The first is that prices before Covid had already reached peak valuations. Secondly working out valuations post-Covid has proved very problematic – just look at how the market has valued the giant leap in EBITDA enjoyed by Synlab.
Meanwhile there is a back log of sales which have yet to happen. Healthcare Business International knows of 275 investments made in healthcare service companies made on or before 2017 which have yet to sell, of which 210 are in Europe and the remainder in Emerging Markets. That is a lot of stuff to sell.
In some cases the failure to sell isn’t a bad thing. Mid Europa claimed that Regina Maria was such a good asset that it would be holding on to it. Much the same logic underlies Apax Partners decision to get one Apax fund to buy out another at Unilabs. But elsewhere it reflects PE deciding not to buy. One banker told us: “That leaves a few infrastructure funds and they were not prepared to bid high enough.”
So what happens next? There should be a big burst of M&A activity in the next six weeks. Expect several more IPOs in health care services before Christmas. Meanwhile the big buyers over the next year are likely to be big listed groups – Fresenius, Orpea and Korian – are all hyperactive.
HBI Deals + Insights members can read about a slew of deals in this week’s main story.
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.