UK Healthcare & Education Update - Summer 2017
An overview of the Summer's M&A activity and we hear from Clare Connell from Connell Consulting
Welcome back, post summer and a brief hiatus, to the UK healthcare & education M&A summer 2017 update.
The summer was an interesting one - who knew what the mood would be following both Trump's and the UK's elections - however M&A appetite in UK healthcare does not seem to be waning, with the deals highlighted here only part of those acquisitions disclosed overt the summer months.
Education acquisitions typically remain strong in the same core sectors (nurseries, training and private education), however uncertainty remains in apprenticeship businesses and those businesses with a strong international focus.
For day-to-day updates in the UK Healthcare and Education sector, follow us on twitter @Nexus_CF
Recent M&A Activity
- Witherslack Group, a provider of education, therapeutic and residential care for children and young people with special education needs, has been acquired by Charme Capital Partners, with Livingbridge and management both reinvesting in the deal (Undisc.).
- Voyage Care has acquired Focused Healthcare, which provides care services to children and young people with complex, acute and chronic illnesses. (Undisc.)
- 122 Bupa Care Homes have been acquired by HC-One (£300m)
- Lighthouse Healthcare, an 11 site specialist learning disability and mental health provider, has been bought by Elysium Healthcare (Undisc.)
- Apposite Capital has acquired a majority stake in Swanton Care and Community, a provider of residential and supported living care for adults with complex learning disabilities, mental health disorders and acquired brain injuries. (Undisc.)
- City and County Healthcare Group have acquired Scottish domiciliary care business, Constance Care. (Undisc.)
- Prospects Group has acquired 18-site education and care business Homes2inspire (£11.4m)
- RCapital has backed the MBO of SciChem, a distributor of scientific and laboratory equipment, supplying education and industrial sectors (Undisc.).
- Surgical Innovations Group plc has acquired Elemental Healthcare, a specialist distributor of medical products. (£9.4m)
- Ieso Digital Health, a provider of online mental healthcare, has raised £18.0m from Draper Esprit and Touchstone Innovations.
- Clanwilliam Group acquired Medisec Software a digital clinical correspondence and dictation businsess for the NHS. (Undisc.)
- Arrow Business Communications has acquire Worksmart Technology, a communications business with a strong focus in healthcare. (Undisc.)
- Partners Group acquired Civica, a UK-based provider of software and services, with strong healthcare focus ($1.3bn)
- Graphite Capital acquired Random 42, a medical animation producer, from Vespa Capital (Undisc.)
- Cambio Healthcare acquired Cayder, a provider of solutions to manage the flow of patients through the care process (Undisc.)
- Medvivo acquired Expert 24 a provider of clinical decision support applications (Undisc.)
- Day Lewis Pharmacy has acquired 18-site Community Pharmacies (Undisc.)
- The Linneaus Group has acquired 20 site + Village Vets (Undisc.)
- Key Capital Partners invested £8.6m MBO of YorkTest.
- CPL Resources acquired healthcare recruitment business RIG Healthcare Group (£8.1m)
- Huntsworth plc, an international healthcare and PR communications group has acquired the Creative Engagement Group (£25m)
- Endless acquired Capita's Affinity Workforce Division (Undisc.)
- Nexus Corporate Finance advised Chanelle Medical U.K. Ltd on the sale of their generic pharmaceutical business (Undisc.)
- Aurora Group has acquired Foxes Academy an outstanding-rated hospitality academy for students with learning disabilities (Undisc.)
- Kiddi Caru acquired by Les Petits Chaperon Rouges (Undisc.)
- Alder Training, an apprenticeships business, has been acquired by Regenda Group (Undisc.)
- Sandycove School of English has been acquired by New College Group (Undisc.)
- St Giles International has announced the acquisition of the New School of English in Cambridge (Undisc.)
- Dukes Education acquired Cardiff Sixth Form College (Undisc.)
- Bellevue acquired Bruern Abbey School (Undisc.)
- Oxford House acquired English Language Academy (Undisc.)
- Premier, a UK sports education provider has acquired school improvement company B11 Education (Undisc.)
- Palatine Impact fund acquired Trade Skills 4 U (Undisc.)
- Palatine has invested in TTC Group, a provider of road user and cycling education courses in the UK (Undisc.)
- CVC has acquired a controlling stake in UK IT training provider QA Training (£700m)
- Adept Telecom has acquired Atomwide, a provider of IT services to the education sector (£12m)
- Investcorp Technology Partners has acquired Impero, a classroom monitoring and student online safety edtech business (£27.5m)
"HC-One’s acquisitions this year - 122 Bupa homes announced in August and Helen McArdle back in January - are a sign of the increased consolidation in the sector. The squeezing of social care budgets, greater competition for good staff and increasing regulatory scrutiny by the CQC has driven market consolidation.
Overall the elderly care home market is relatively fragmented, with the ten largest for-profit providers holding just 24% of market capacity. Much of the remaining 76% of the market is made up of smaller operators, who may run one or two care homes. These smaller operators are the ones most feeling the squeeze financially; they have seen a fall in the amount that councils pay towards fees for residents, whilst also footing mounting costs driven by the National Living Wage.
The tougher CQC regime favours larger operators who typically have better training and processes, more capital to invest in their homes and more staff dedicated to maintaining quality. This has resulted in smaller operators often being forced out of the market or deciding to sell up, as running a small care home operation has become a tougher business than it used to be. Since the new CQC inspection regime was introduced, the price for which individual care homes can be bought for has also become more realistic than a few years ago.
These smaller operators usually find it harder to compete with the brand new, purpose built homes that will be marketing to the self-funder market that drives profitability. In the South the better alternative use value of care homes that are no longer fit for purpose means that old capacity closure responds quicker to the introduction of new capacity. Up north, where the options for alternative use are less attractive, local authorities are increasingly using banded fee rates to push older capacity and small or difficult to staff homes out of the market. At the same time limited new capacity is being built, usually plush private pay facilities, resulting in a contraction of supply in the elderly care home market.
The market is seeing increased demand due to the ageing U.K. population, reduced supply and recent modest improvements in funding due the increased Nursing FNC and council tax increases to fund elderly care. These are helpful market dynamics for good quality care home providers in the future."