Is internationalisation worth the effort?
Internationalisation is often seen as the badge of success worn by high-flying companies. And yet – of late – we’ve seen a surprising number of companies pulling back from their international commitments to concentrate on their core business.
Many CEOs who once boasted of grand plans to build pan-European or Pan-Asian networks now have a narrower focus. But why?
As regular Europa readers will know, in the case of Capio, which just sold its French business to Vivalto Santé, the answer is clear. Capio wants to focus on primary healthcare, it wants to focus on the Nordics, and it wants a laser-sharp focus on improving its digital health offering – and that is a far more appealing prospect than holding onto a struggling business in France. The fact that it sold its French arm for a higher multiple than the group was trading on itself is a bonus – and it is likely to cool the ardour of recent hostile suiter Ramsay too. Expect its German business to go next.
Meanwhile, South African giant Netcare is similarly looking to exit the UK. High rents and declining PMI make a compelling argument here. On acquisition, BMI might have seemed an attractive option, a way to diversify into a new market and spread the risk. The sale, however, when it happens, will bring to an end Netcare’s unsuccessful 11-year UK experiment.
Similarly French lab group Cerba is reportedly looking to exit its UAE-based subsidiary Menalabs after just two years. It seems likely a comparatively small and distant asset on foreign soil is disposable compared to the riches (and synergies) available at home, even if something like French regional lab chain Groupe Bio 7, bought in May, costs an arm and a leg.
We see a similar situation in purely emerging market deals too – and not only with struggling businesses like Capio France or BMI. Last month, Australian private hospital and pathology services provider Healthscope divested its pathology operations in Singapore, Malaysia and Vietnam to private equity firm TPG Capital Asia for a 15.3x multiple – despite the sector being ripe for consolidation in these countries. Why? Because the board felt that, irrespective of success, the geography of Asia didn’t sit well with what it considered its core region (Australia and New Zealand).
It’s only an anecdotal observation, but we do get the feeling a lot of groups are thinking the grass these days is greener at home.
There are, of course, notable exceptions, where groups face greater problems at home than abroad, as readers can see this week with Ribera Salud, fighting a losing battle to hold onto its PPP model in Spain, looking to Slovakia for profits.
But in a lot of cases, there is no need to climb aboard the gravy train bound for distant lands, when you could have a larger slice of the pie at home.
We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.
