With the uncertainty surrounding the Health and Social Care Bill’s passage now over, we expect M&A activity to increase over the coming months. But where do the opportunities lie?
The Bill has opened the door for private sector companies to bid for projects across the NHS as well as the private sector, and there are a number of specialist areas which offer significant potential for growth.
For example, we expect significant investment in locally-accessible diagnostics and treatment services – areas that have historically been underinvested – and this investment should drive both M&A and private equity activity in this sub-sector.
Residential care should also benefit. Despite concerns about pressure on fees and government funding, the care home sector has remained relatively buoyant. The longer-term prospects of this subsector may be undermined by the increasing emphasis on homecare, which is much less expensive and potentially disruptive – as the population ages, providing health and social services in the home rather than in a hospital or care home environment should prove much more cost-effective. We expect further consolidation in the care homes space, and significant medium-term investment and growth in the homecare sector.
In general, businesses which promote efficiency and reduce costs to the private and public sectors will be the greatest beneficiaries of the Bill and of the general climate of austerity. Technology-led businesses which help reduce costs and increase efficiency should continue to grow, and those which encourage patient compliance with treatment or medication regimes are particularly attractive.
More broadly, diagnostics which enable more targeted and effective treatment offer further opportunities. While the dream of personalised medicine remains some way off, companion diagnostics offer a cost-effective step towards it, and the diagnostics sector as a whole remains very fragmented. We expect significant activity in this space over the medium-term.