Is M&A back in business?
COVID has clearly had a chilling impact on healthcare services M&A over the last few months. Some deals have fallen through. Some M&A-focused teams have seen their numbers paired. Some deals are simply on hold. As we emerge from lockdown, however, HBI hears there are positive signs of returning to business as normal.
On the supply front, a willingness among older practitioners who were already looking forward to retirement to sell up, or to join corporate networks to gain security and support post-COVID looks set to accelerate pre-COVID consolidation plays, especially in outpatient sectors like dentistry and ophthalmology. ‘What if’, we hear smaller, independent practitioners asking, ‘this happens again’? It’s possible larger groups looking to sell themselves may want to take advantage of this, and we may see them hoovering up distressed assets quickly.
On the demand side, a lot of funds and operators are tired of sitting on their hands. We hear there is a lot of dry powder around, and this is especially true of PE-backed groups looking to build national – or even international networks. People want to do deals again.
When it comes to larger transactions, the outpatient M&A platforms considering launching a sales process this year before COVID came along may opt to continue the roll-up smaller groups, more of whom should come to market. Large deals will be restricted to three instances. One, those pulled mid-process due to COVID-19. Two, carve-ups of groups with creditors to pay (NMC, Four Seasons etc). Three, providers who are being protected from the worst effects of COVID by their national payor (Elsan, this week’s lead story, and Rhoen, which just sold).
One of the biggest drawbacks over the last few months, we hear, has been the inability of people to physically meet and do business. “Don’t underestimate the importance of being able to look into a vendor’s eyes and shake his hand” one tells us.
And what of pricing? We’re still waiting for a substantial post-COVID transaction to judge this, but operators tell us they don’t currently see any multiple changes on the horizon. On the evidence present in this week’s HBI news, we may not need to wait too long.
We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.
