UK healthcare market still fighting fit post-Brexit

There is considerable uncertainty about the impact of recent momentous changes in the healthcare sector, but we anticipate further M&A activity with a renewed focus on funding streams and business efficiencies without compromise on quality of care.

The introduction of the National Living Wage made last year a difficult one for social care, but following its implementation and the beginnings of fee increases coming through, the outlook is more positive than it has been for some time. There is a renewed focus on less traditional care models, such as private-pay homecare, as the funding landscape evolves and we are closely observing how these challengers alter the social care sector with a move towards a reduced dependence on local authorities.

There is continuing talk of integrating health and social care budgets and developing new models to try and fill the gap between hospital and home. Private sector participation within the NHS also continues to be a source of political discussion, but as the NHS strives for efficiency savings and to modernise, significant opportunities are likely to present themselves.

Other subsectors, such as medical products and pharma services, are proving highly desirable to investors, with high multiples being paid for these businesses, particularly by private equity and overseas buyers. Medical products are of interest to investors as there is the opportunity to acquire more products to feed into an established sales and distribution network and also to take products into new international markets.

Healthcare technology is emerging as a key interest area, as the requirement for cost-effective and improved patient outcomes becomes increasingly acute. The sector is years behind the curve and large-scale implementation is required" - Peter Jennings, Grant Thornton

There have been a number of highly successful exits from private-equity-backed pharma services such as Kinapse and Synexus, as big pharma are more willing to outsource activities in an attempt to improve the efficiency of their drug discovery processes and maximise the profitability of established drug portfolios.

Retail healthcare, which includes dentistry, vets, opticians, IVF clinics and pharmacies, has long been a popular and successful area for investment, as fragmented markets are consolidated and larger corporate operators benefit from economies of scale. There is still scope for further consolidation in each of these markets, although competition for bolt-on acquisitions has increased.

Healthcare technology is emerging as a key interest area, as the requirement for cost-effective and improved patient outcomes becomes increasingly acute. The sector is years behind the curve and large-scale implementation is required. The smaller niche operators continue to have appeal with private equity looking for a unique offering and corporates looking to acquire and develop new technologies.

Within Grant Thornton’s healthcare team, we have seen significant value created across a range of verticals and buyer groups; and despite the current levels of uncertainty there are still strong returns to be made for investors in the sector.