Over the past quarter, the healthcare sector in the United Kingdom has continued to see healthy M&A activity. Companies across the industry, including pharmaceuticals, medical devices, and healthcare services, have been actively pursuing deals to gain a competitive advantage, expand their portfolios, and improve their overall market position. From large-scale acquisitions by multinational corporations to smaller, strategic deals by regional players, the UK healthcare sector has witnessed a diverse range of M&A activity. The UK healthcare market is a highly attractive prospect for acquirers due to several factors. The growing and ageing population is driving up demand for healthcare services, presenting an opportunity for companies to invest in the sector. The UK has a well established healthcare infrastructure and a highly skilled healthcare workforce, providing a strong pool of talent for companies to tap into. Further, the UK’s strong R&D industry allows companies to invest in healthcare innovation and bring new products and services to market.
Alpha Helix Corporate Finance observed 66 UK healthcare deals in the first quarter of 2023. Although deal volumes in 2023 Q1 are lower than in 2022 Q1, the sector continues to see large acquisitions outnumber those in the other three quarters of 2022. That said, in the current higher interest environment we expect a slowdown in the larger deals over the next 12 months as companies find it harder to secure attractive financing for bigger transactions. Medical Devices and Equipment, Healthcare IT, and Pharma and Biotech saw the highest M&A activity in Q1 2023, accounting for 18%, 15%, and 15% of total Q1 activity respectively.
The dentistry sector continues to be consolidated by both private equity-backed funds and large trade buyers. In particular, Portman Healthcare appears to be aggressively acquiring dentistry business, as evidenced by their three deals in the last year, which include St Michaels Family Dental Practices, Southgate Dental Care in Q1 2023, and its merger with Dentex Healthcare Group last year, which now makes it the largest dental Group in the UK.
Occupational health and Healthcare IT are sub sectors that have also seen significant M&A. PAM Group purchased MedProtect in January 2023, and Medigold acquired Health Management in March 2023. Deals in occupational health are projected to continue, with consolidators such as PAM Group and Marlowe expected to remain active after 7 acquisitions in 2022. Many transactions have emphasized the attractiveness of data, software, and technology services that assist the NHS in resolving long wait times and backlogs and the effective administration of private healthcare providers. Notable IT transactions include DNV's acquisition of MBI Healthcare Technologies, System C's acquisition of Clevermed, YFM Equity Partners' acquisition of INCH Ltd (operating as Dr Doctor), and the Maven Clinic's acquisition of Naytal.
Major deals include JATT Acquisition Corporation acquiring Zura Bio for £109.8m, Oppenheimer acquiring Perspectum acquiring for £36.0m, Gedeon Richter acquiring OC Distribution for £32.5m, and the acquisition of Vivasure by Haemonetics for £26.5m. The largest observed deal was Thermo Fisher Scientific Inc's acquisition of Binding Site for £2.3b. Binding Site which provides specialist diagnostic products to clinicians and laboratory professionals complements Thermo Fisher’s diagnostic equipment manufacturing operations.
Other notable deals include the merger of E-Zec Medical and ERS Medical which created the UK’s largest provider of NHS transport services and expanded the locations serviced and the market reached. New Foscote Hospital, as a part of their new buy and build strategy, has acquired The Royal Buckinghamshire Hospital. This acquisition aimed to recognize the synergies between the two and to make significant investments in the services, staffing, and infrastructure. Montreux Capital Management also continues to be active in the care services sector, with its recent acquisition of Zero Three Care.
Although we expect a decline in the volume of larger healthcare deals and possibly a slowdown in VC investment as investors weigh the impact of higher interest rates, there is nonetheless strong demand for lower/mid-market UK healthcare assets from the traditional trade, private equity and family office investors as well as from new buyers less familiar with the healthcare space that are looking to allocate funds to a non-cyclical sector with strong demographic tailwinds.
If you are interested in selling your business or you would like to discuss what the process involves or how buyers might value your business, we would be happy to have a confidential conversation.