Each year in May, the UK recognises Mental Health Awareness Week. The publicity has helped individuals seek professional care without feeling shame. It is, therefore, no surprise that the demand for mental health hospitals and care facilities has skyrocketed.
With a rise in individuals seeking mental health treatment, the NHS considered whether admitting patients straight to hospitals was the most effective form of treatment. As part of its Long-Term Plan, the NHS has shifted its primary focus to supporting and providing community-based care. Furthermore, the NHS continues to outsource its less acute mental health services to independent hospitals and community care providers. Patients can receive treatment out of a traditional hospital setting and adjust to living within society. These providers are experiencing a surge in demand as more people can access care.
Investments within this sector are becoming more appealing as the demand for these services increase. The market shows a promising future, with the NHS budget for mental health services expected to grow faster than the overall budget. The total mental health market in the UK is projected to be £13 billion in 2020 and increase by £2.3 billion in real terms by 2024. The independent market currently accounts for 12% of the total, with expectations of gaining market share. As the NHS increases their outsourcing of lower risk patients, the number of inpatient hospital beds has drastically declined from a peak of 150,000 beds in 1955 to below 24,000 in 2017. Independent providers can capitalise on the reduction in supply of NHS beds by expanding their capacity to cater for patient care.
As the market evolves, there are further opportunities for private players to expand. With the increasing trend towards more holistic hospital and community care, these providers can set out a fully integrated recovery pathway from initial hospital admission to community care. Recent M&A activity supports the trend towards integration of care, with a movement towards both vertical and horizontal integration. An example of this horizontal integration strategy is Totally plc, an out-of-hospital care provider acquiring Greenbrook Health care, a provider of NHS urgent care centres and GP services, for a total consideration of £11.5 million in May 2019.
Acquisitive growth allows providers to increase capacity quickly and drive occupancy in order to accommodate additional patient demand. PE backed, Swanton Care & Community has acquired Courtyard Care, a UK-based mental health care provider for children, in January 2019 and Values in Care, another mental health care provider in May 2019, growing the number of beds within the Group.
The independent mental health care market has a promising future. As the stigma surrounding mental health declines, investors can expect an increase in individuals seeking help, leading to higher demand for facilities. With the NHS continuing to outsource to independent providers, there is greater incentive for investors to enter the market. M&A activity has reflected the increased investor interest and the growth in the market is not expected to slow down any time soon.
Recent UK mental health care home deals include:
• Care Concerns acquired Willinbrook Healthcare Limited, a specialist care home for patients with mental health issues in July 2019
• Private equity company, Elysian Capital acquired Aspirations Care Limited, a mental health care home, in June 2019
• Prestige Nursing Limited, a homecare service provider for the elderly, young adults and children, acquired Care Management Group Limited, a UK-based health care service provider for learning disabilities, autism, and mental illness, in April 2019 by for an undisclosed consideration
• In March 2019, Civitas Social Housing (REIT) acquired nine regulated social housing properties for £7.8 million after a recent bout of investment activity