Update 6 April 2021
I hope that you have had a nice Easter weekend. Here in the Netherlands the weekend has been cold and wet (even with some snow) but hopefully you have had nice weather. In this update we cover:
- High level of PE-driven transactions lately. What will be the next PE-owned company to be sold?
- Orpea makes an acquisition in the mental healthcare sector. Are further acquisitions in the pipeline?
- A hospital to be privatized. Will private hospitals be successful this time?
- Number of commercial specialized clinics expected to double in the next five years. Where will the growth come from?
- More real-estate investments required in the healthcare sector. How will this be financed?
What will be the next Dutch healthcare companies to be sold?
In recent months there has been a remarkably high level of M&A activity in the Dutch healthcare market. Recent activities include:
- Sale of Eurocept Homecare by GIMV to Mediq
- Sale of Mentaal Beter by NPM to Apax Partners
- Acquisition of Bergman Clinics by Triton
- Ongoing transaction for Mediq
- Ongoing sales process for Ceban by Bencis
All these recent and ongoing transactions have been initiated by private equity companies. Given the typical time frames of the funds run by the private equity companies it is possible to give an estimate for when they will sell their assets. The following table gives an overview of Dutch-based healthcare companies owned by private equity (or companies like private equity).
Several of the companies on the list have been in the possession of private equity for a considerable amount of time. Are there owners thinking that the current market situation is a good time to sell? What will be the next Dutch healthcare company to be put on the market?
Orpea makes a mental healthcare acquisition
Orpea has recently acquired Zorggroep ‘t Zicht. Zorggroep ‘t Zicht provides longer term psychiatric care for approximately 100 clients with a broad range of issues including autism, psychiatric issues, and other disabilities. The group provides both living accommodations and ambulatory care to clients living independently. The group will be integrated operationally with the existing activities of Orpea in this area (Woonzorgnet). Rumors on the street say that Orpea is looking for further acquisitions in this segment. What will be the next acquisition?
Hospital to be privatized?
HMC is the owner of three hospitals around The Hague. A few months back they announced that all activities are to be concentrated in two of the locations and that the Bronovo hospital is to be closed in 2024 at the latest. HMC will then demolish the hospital and sell the real estate (which is potentially very valuable if used for residential purposes).
There is much resistance to these plans in the local community. Last week, Chris Oomen, who used to run one of the Dutch healthcare insurance companies, announced that he wants to buy the hospital. Given that two other privately owned hospitals went bankrupt in 2018 there are doubts whether Chris Oomen will succeed. However, a closer look at his plans show that he does not want to keep the Bronovo as a general hospital. Rather he plans to develop it into a combination of a specialized clinic and a facility focusing on chronic disease management.
HMC has not yet reacted. As this transaction would mean a new competitor that will take market share and probably will provide less cash to the hospital group than a sale to property developers, I have my doubts whether they will be willing to make a deal with Chris Oomen. I will keep you posted.
Number of specialized clinics to double in the next five years
The trade association for the specialty clinics (ZKN) has announced that it expects the number of patients treated by its members to double (from one million to two million) in the next five years. ZKN expects that many of the existing 400 specialty clinics will expand and that another 100 new clinics will be built in the next five years.
The main driver for the growth is the short waiting times for treatment at the specialty clinics. The clinics are also seeing strong growth in referrals from general practitioners and from the healthcare insurance companies. In addition to shorter waiting times other issues such as patient satisfaction, small scale and high quality also play a key role in driving the expected growth.
This is certainly good news for Triton who are now heavily invested in the Dutch specialty clinic market after the large investment in Bergman Clinics, but will also make current investors in other specialty clinic chains happy ()see earlier list).
Major real estate investments required in the healthcare sector
A recent study from ABN AMRO focuses on the need for the Dutch healthcare sector to invest in the refurbishment and / or replacement of existing real estate to meet agreed goals on CO2 emissions. The agreed goals are a reduction of 49% by 2030 and a 95% reduction by 2050. ABN AMRO has looked at the age of existing real estate (60% built before 1990), and the investments required to reach the agreed goals (refurbishment if economically viable and replacement when refurbishment is not possible or viable) per age-group of real estate. The conclusion of the analysis by ABN AMRO is that the sector will need to invest €8.1 billion in the next ten years if it wants to meet the agreed targets.
In this study ABN AMRO has not looked at the effects of additional capacity needed to meet growing demand. As a consequence, the €8.1 billion for CO2-related refurbishment comes on top of the €1 billion annual investments required to meet growing demand for (mainly) new nursing homes. It will be interesting to see how healthcare providers will finance these large investments. In addition, this highlights the opportunities that will be available to real estate investors in the Dutch healthcare sector.