A tough first half
Deal volume in health care was massively down in the six months to June 2023. Will it get better and where?
With deal volume down, where are the opportunities? Click here to see the agenda for HBI 2023.
Talking to investors and advisers there is no getting away from pessimism. With the solitary exception of Diaverum there were no big deals in health care services in Europe. And M&A consolidation has also ground to a halt with several EBITDA multiples separating buyer and seller expectations. Even good assets, like European Dental Group, have not sold in the current climate.
It is not hard to see why there is a general problem. Debt costs around 11% and banks are lending 4-5 times EBITDA, not seven or eight. And health care has been particularly hard hit by other trends: wage inflation and higher food and heating costs. Add the ongoing impact of the Orpea scandal and it is clear that investment committees have become ultra cautious when it comes to reputational risk. Meanwhile, valuations in most areas of digital health have collapsed.
What is the upside?
There are still some high growth sectors like teleradiology which attract attention. Fear of missing out is still powering investors in a few key sectors. And some digital sectors, notably hospital at home, show huge potential.
Most health care operators are sticking to the knitting. “How do I sweat existing capacity?” is the question on everyone’s lips. Self-pay is also set to soar in many countries as public payors discreetly exit sub-sectors as diverse as dentistry, domiciliary care and mental health.
Visibility on financial markets remains limited. Forecasting a widespread resurge in the second half would be brave. But the huge underlying opportunities in health care as the population ages, national health systems struggle, and demand grows remain a constant.
Hedley Goldberg, partner, Rothschild & Co will be looking at the healthcare M&A landscape at HBI 2023, and a session following this on investing in Europe will address how major investors in the sector view the challenges ahead, and in which sectors and countries are there opportunities?
We would welcome your thoughts on this story. Email your views to Max Hotopf or call 0207 183 3779.
