Is private equity finished with Finland?
This week Finland’s competition authority has opposed CVC-backed Mehilainen’s proposed takeover of Pihlajalinna saying that the group would hold at least a third of the private market. With so much consolidation, coupled with the dampening of SOTE reforms, we’re unlikely to see any more private equity deals go down in the sector.
The total Finnish privately-provided healthcare service market is likely to be around about €3-3.5bn with a Mehilainen and Pihlajalinna accounting for 30-40% of this. Terveystalo is a similar size which means a whopping two-thirds of the market would be held by two groups if the merger was approved. That is not competition friendly – as evidence by the FCCA decision – but also shows how little growth is left at the top of the market.
There are just 13 assets with more than €50m revenue in the market and most of these are owned by pan-European groups like Synlab or Colosseum Dental.
As one Finnish bank analyst says: “Private equity have done their deals in the sector.”
The large healthcare service providers will continue to make bolt-on roll-up acquisitions in a war of attrition to continue to edge ahead of one another but are not likely to be able to complete any more large deals. It’s only a matter of time before they start to look abroad. Mehilainen has already been selling its digital technology abroad and HBI understands that a spin-off is on the cards. We’re sure CVC will also have one eye on how to exit from a market where any buyer will have trouble finding growth.
Where does that leave the rest of the market? It’s unlikely that any new private equity is going to be able to roll up the remainder of the market and create a valuable competitor to the top 2-3 players. And although SOTE has not officially been put to bed, it has become quite clear that it’s no longer the growth opportunity that many thought it would be. The FCCA has insisted that the Mehilainen decision is not political but we’re sensing a government much more hostile to the private sector.
The outsourcing market looks risky and there’s much less room for consolidation without falling foul of competition laws. Does that look like a tempting market?
We would welcome your thoughts on this story. Email your views to Rachel Lewis or call 0207 183 3779.
