November 2016 - UK Healthcare & Education Update
An overview of November's recent deal activity and we hear from Dr Leonid Shapiro, Managing Partner of Candesic.
UK Healthcare & Education Update - November 2016
Heading swiftly towards the end of the year, November has seen a significant uptick in deal activity, with the likes of Oasis & Cambian trading.
Look out for our 2016 round-up which will be coming to your inboxes early in 2017.
For day-to-day updates in the UK Healthcare and Education sector, follow us on twitter @Nexus_CF
This month's activity:
Recent M&A Activity - recent healthcare and education M&A activity
Last Word - we speak to Dr Leonid Shapiro, Managing Partner of Candesic.
Recent M&A activity
• Surgical Innovations Group plc, specialist in design and manufacture of devices for minimally invasive surgeries, has acquired laparoscopic instruments business Surgical Dynamics.
• Specialist nursing and rehab facility Badby Park has acquired Middlesbrough Neuro-rehabilitation centre The Gateway, from administration.
• Life science commercial intelligence firm Evaluate Ltd has received investment from HgCapital.
• Paydens Pharmacy has acquired SG Court Pharmacy creating a 129 site business.
• Oakdale Care Group has obtained a £13 million debt facility from Clydesdale Bank.
• South African based Life Healthcare acquired 95% of Alliance Medical for as much as £800 million.
• Bupa is to acquire Oasis Dental Care in a deal totalling £835 million.
• Oakdale Care Group has agreed a sale and leaseback with Target Healthcare REIT.
• CMA has now approved the merger between Acadia Healthcare's Priory Group and Partnerships in Care.
• Bridgepoint Development Capital acquired Inspiring Learning, an activities and tour provider to young people including Camp Beaumont Day Camps, for c. £100 million.
• Global University Systems has acquired IBAT College Dublin, a provider of tertiary education in Ireland.
• Prospects Group has acquired education conference provider Optimus Education from Electric Word.
• Pi-top, a Raspberry Pi laptop building kit for teaching coding and IT in schools, has raised £3.5 million Series A fund raise.
• Bright Horizons acquired Asquith Nurseries, bringing their total number of nurseries to > 1000 worldwide.
• Training and consultancy firm OPP Ltd, European distributor of the Myers-Briggs Type Indicator, has been acquired by psychology assessment company CPP.
• HICL Infrastructure Company has acquired 6 UK and Ireland education public-private partnerships from Hochtief PPP Solutions for £22.7m.
• Talent Training has acquired Pera Training, a company with around 2,400 apprentices, from administrators.
What is Private Equity to do? This month has seen several prime companies scooped up by trade at double digit multiples leaving PE investors in the dust. Perhaps a good thing, in some respects, as it's the crazy multiples offered by some PE bidders in 2006 that created some of the worst investment disasters of the last decade, so I'm glad to see PE being more reasonable with valuations these days. But with the likes of Oasis and Alliance Medical going for eye watering multiples to corporates, it leaves two questions unanswered: How will corporates make money from them, and, what where should PE focus now going forward?
Life Healthcare, who bought Alliance Medical at a valuation of £800m representing a multiple of 13x a month ago, has lost 14% of its market capitalisation since the acquisition. Thus wiping out almost 50% of what they paid for Alliance! While Alliance Medical has strong fundamentals, there are little synergies with Life, a South African acute hospital group, and it is likely that a key reason for the transaction was to diversify away from the Rand and the South African market. Perhaps the market is sending a signal about what Alliance is really worth... and what PE would have likely paid for it.
Bupa, who bought Oasis Dental for £835m representing a multiple of over 20x, is now considering how it merges the Oasis business with 380 practices with it's much smaller business of 40 practices. Again, some synergies and head office savings but not nearly enough to justify such a price. Clearly, Oasis (and being a major player in the dental sector) is strategically important to Bupa over and above any direct financial benefit.
Cygnet, who just announced the acquisition of Cambian's adult services business for £377 million representing a multiple of 15x, is fortifying its position in the UK behavioural sector after it's US arch rival Acadia has acquired both Priory and Partnerships in Care and who will merge them now after they have divested 22 hospitals (a small fraction of the total estate) due to CMA concerns. This multiple, far beyond what private equity would pay, is likely to be repeated by Cygnet as they are still much smaller than Acadia. Good news for PE exits and it is likely other assets will come out of the woodwork for sale.
For PE this is mixed news. It's a great time to find similar exits but they have to work harder to find acquisitions where they will not be competing with such corporates. Perhaps PE need to be more creative in going after deals with more hair on them or ones with breakup or restructuring potential which corporates will find harder to digest. Then there is the strategy to focus on organic acquisition to fuel growth before a climatic exit, betting on the markets not deteriorating in the meantime. In any case, until we see another recession, PE may find it hard to compete with corporate money on straight forward investments.
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