Active deals market despite a cloudy economic climate by Paul J Miller, Chief Executive Officer.
Against a backdrop of continued political and economic uncertainty it is pleasing to note that demand for UK healthcare opportunities is strong and is growing. Indeed 2019 has seen increased activity levels in the market and Redwoods Dowling Kerr has completed a significant number of deals throughout the UK. Demand and appetite are prevalent for all types of care with a particular bias towards specialist care. The market overall demonstrates the resilient strength of the sector in times where it would not be unusual for deal making activities to be placed on hold. It also demonstrates the magnitude of the opportunities which exist within the UK given the ageing demographic of the population and the increasing need for quality care provision.
Redwoods Dowling Kerr welcome the recent announcement from the new Prime Minister, Boris Johnson, that he intends to “fix the crisis in social care once and for all”. It is fantastic to see such desire but concerning that the words spoken were not backed up with a robust plan of action. Indeed, it is startling to see that adult social care funding is still £700m per annum below the levels received in 2010-11. Whilst we are not sure the PM fully understands the scale of the issues and the funding gap, if Boris does manage to deliver a plan to “fix the crisis” then this will represent significant opportunity for the private sector. One thing that is certain is that these issues will not go away and thankfully their profile is being raised.
Earlier in the year I commented on the funding market and my expectation that the challenger banks would increase their underwriting capabilities to secure a larger share of the lending market and it is pleasing to observe this take effect.
Out of our September completions, three deals were funded via “challenger banks”. The increase in activity by the new entrant lenders will be extremely positive for the Healthcare Deal market as it significantly increases the range of financial products and suppliers available to assist in enabling buyers to complete their acquisition strategies.
At the time of writing, and as we approach yet another “Brexit Deadline,” we are yet to see any negative impact caused by the government’s indecision in resolving this position. It is undoubtedly the case that the economic uncertainty has caused some UK based operators to delay their expansion plans, however the increase in international buyers seeking to acquire UK assets has assisted in balancing out any negativity. In fact, a recent press release in Healthcare Business commented that 2019 has seen the highest M&A activity since 2016 in the Healthcare services sector. This increase in activity has been partly due to interest from overseas buyers who are looking to take advantage of the weak sterling position and acquire high quality UK assets.
Redwoods Dowling Kerr are looking forward to closing out 2019 with a number of significant deals which are currently in our pipeline and are anticipated to complete prior to the year end.
As we look ahead to 2020, we expect the demand for good quality elderly care homes to continue to be strong with increasing focus on specialist care facilities for both children and adults with the homecare sector continuing to consolidate.
To read the report please click here.