Reasons to be cheerful
Given the turmoil of recent years – the pandemic, soaring inflation, soaring energy costs, supply chain issues, a work force crisis, and war – it is good to bring you some good news for a change. There is a real feeling among industry leaders that the tide is set to turn.
According to a newly published report by multinational independent investment bank and financial services company Jefferies, not only has the health care sector (including, but not limited to, services) remained resilient, the future is bright – with private equity apparently more optimistic about prospects going forward generally than most.
In services, M&A has been sluggish over the last year or so – with a few noteworthy exceptions (Spain based fertility group Eugin, radiology services group Alliance Medical and the UK’s second largest hospital group by revenue Circle Health immediately spring to mind – but these are the exceptions rather than the rule).
But the deals rumour mill has been spinning back up in the last few months and HBI is pursing news of a handful of large deals it understands are in the pipeline – and this sentiment is echoed by the Jefferies report (as you can see here). There is confidence M&A levels will rebound in 2024.
It isn’t all plain sailing of course. The number one concern is a lack of accessible capital, which explains the mixed views of the report’s respondents on the appetite for IPOs.
And it is interesting to see how healthcare services fits into the wider picture here. Biotechnology was the sub sector which was most widely predicted to be the best performing sub sector (according to 28% of all respondents), followed by large cap biopharmaceuticals (23%), with services favoured by just 6% (slightly down on the two previous years).
Compared to other sub sectors, services is seen as the poor relation. But it is the poor relation in a rich family, and the fact that it cannot compete with the biggest winners does nothing to detract from its resilience and prospects in its own right.
And to finish on something positive: while inflation, energy costs and workforce remain a concern, Covid does not. It is no longer top of the agenda, with 84% of respondents stating Covid is no longer a major threat to markets. This is something everyone can celebrate at a human level – even the labs groups affected by an industry-wide decrease in demand for testing kits.
We would welcome your thoughts on this story. Email your views to David Farbrother or call 0207 183 3779.
