The volatility of the past decade has undoubtedly affected market and investor confidence, with key events such as the pandemic, the invasion of Ukraine, and the effects of current US trade policy and Brexit, serving as major forces that continue to shape the UK economic landscape, public finances and investment decisions.
Against this backdrop, this year’s Investing in Healthcare conference brought together operators, investors and advisers to examine the key issues affecting investment in UK health and social care today, while also exploring the investment opportunities that the sector currently presents.
Here are our ten key takeaways from the event.
Deals have generally become more complex, time-consuming and slower to complete, though the sub £20m deal market remains relatively active. That caution will remain while regulatory issues and high inflation and interest rates persist.
With the issues around CQC inspections in recent years, particularly their infrequency, more detailed due diligence of regulatory compliance is needed to assure buyers on the quality of care targets offer and provide clarity on reputational risks. This is a particular challenge for investors and advisers unfamiliar with the regulatory landscape.
The pending national insurance contributions rise will be watched closely to see how it affects an industry that is no longer beset by labour shortages. The new UK employment rights being introduced by the Employment Rights Bill are expected to be potentially even more impactful.
Sellers need to take advice from seasoned corporate finance advisers to set the right price expectations at the off. Sector experience here is essential in an unpredictable market.
A good track record of corporate housekeeping and regulatory compliance in areas like data protection laws, plays an important part in preserving business value for an operator in a deal as well as speeding execution. This is a particular issue for those operators that have grown organically over time, as these issues will have been diligenced in bolt-on acquisitions.
Despite the challenges, healthcare remains an appealing long-term investment, particularly to sector savvy investors, with growing demand from service users and resilient funding streams. Advisers are also busy and a few large deals landing in 2025 could see the wider market take its foot off the brake.
Ongoing challenges across health and social care persist, but systems under pressure often spark exciting innovations that drive real progress. The adoption of new technologies by the NHS attracts much attention, but many of the most exciting digital innovations are happening in social care.
The market is likely to see more UK-based trade or private equity backed UK trade buyers in 2025 than investment from overseas investors, whose interest has dipped in the last year. Healthcare users may also seek treatment abroad driven by UK supply and cost issues. It will be interesting to see how this trend evolves.
NHS England is out, but the question remains about how much the private sector will be involved in helping to meet waiting list and patient outcome objectives. At least one speaker suggested that the end of NHS England may increase the scope for private sector delivery.
A well-run, well-prepared business with a strong management team and experienced sector advisers will always be in the best position to succeed. For private equity investors, the experience and motivation of good management teams are the critical component for a successful investment.
