On Thursday 19th June the Healthcare Teams at Cooper Parry Corporate Finance and Pinsent Masons hosted a panel of field-leading speakers who provided a thought-provoking and nugget filled evening.
All our speakers were topical. Particularly with the UK general election on the horizon. They included CEOs sharing tips on driving growth; assimilating multiple acquisitions and working with private equity investors. As well as industry experts talking about healthcare policy and the likely direction of travel under a new government and the current level of buyer interest and recent valuation multiples.
The event took place, very suitably, at London’s Royal Society of Medicine. A venue steeped in history, and yet, one that remains as relevant and important to the future of healthcare as it did when it was first formed in 1907.
Business leaders and industry experts came together to hear from some of the brightest minds from across the health and social care space. Taking the opportunity to really interrogate what’s going on in health and social care and its future direction.
The opportunity to network with peers was appreciated. Something that was evidenced by the buzz in the room at this lively annual event.
Firstly, the entrepreneurs …
GOING FOR GROWTH: EMMA BARNES
Emma Barnes is a Certified FocalPoint Business Coach who has worked as a senior leader within social care; dentistry and funeral services for a number of years. She has a real passion for nurturing teams and growing businesses. All whilst having some fun along the way.
Emma shared some key learnings from her career that apply to all businesses in the health and social care sector. Firstly, when building an effective team to take business forward focus on the future. When you’re recruiting look to tomorrow. Never recruit for today’s skill. You need to make sure you’ve got the skills round the table that you need.
Emma is a believer in recruiting based on emotional intelligence, personality and behaviour rather than relying on skills and knowledge. You need people who can operate at pace and pivot when needed.
When it comes to ensuring growth through buy and builds, Emma provided a few tips:
- Be clear on your end game. If ultimately you plan to eventually exit the business, every decision you make should be geared towards that.
- Integrate and harmonise. Ensure full integration and harmonise new acquisitions. Have a single integration team who really know how to make this happen.
- Be careful of inviting ex owners on the journey – your goals are normally misaligned!
- Don’t over promise and under deliver.
PRIVATE EQUITY TO OWNER: ANDREW WOOD
With a background as CFO in private equity backed businesses, Andrew joined Helping Hands (private pay homecare) in 2014. The team went on to generate over £100m of shareholder value by the time of its private equity investment in 2018. Andrew has since set up a Home Instead franchise providing private-pay homecare and recently acquired a further franchise. He’s now also launching Live In care in both locations.
He shared some of the learnings he’s acquired through his wide-ranging experience of leading profitable health and social care businesses:
- Make sure there’s an alignment between business owners and PE investors when it comes to valuation creation. They’re both sat round the board table but won’t necessarily be coming from the same perspective.
- Make sure you’ve got the right advisors to support you in place. Whether that’s for tax, legal or due diligence or other aspects of the process.
- Get the quality right and the numbers look after themselves. Well, it’s not quite that simple but you get the gist. It’s about having people, from carers to management teams with the right values.
- Recruitment can be difficult but it’s not impossible. Don’t make assumptions about who makes the best type of carer. Use non-traditional routes to reach out to potential employees.
- Make sure your business has digital visibility. Enquiries for home care services often come not from the end user but from a friend or relative who frequently lives out of the area.
- Use the mum or dad test. Ultimately would you be comfortable with your aging parent being cared for by your business?
And the Industry Experts…
THE HEALTH & SOCIAL CARE POLITICAL LANDSCAPE: NATHAN HOLLOW
As Head of Health & Social Care at PLMR, a consultancy specialising in corporate communications, reputation management and political engagement, Nathan advises the Boards of some of the UK’s largest health and social care providers. With a very topical session Nathan looked at how the health and social care landscape may change after the general election.
At the time of the event, the latest polling projections gave Labour a majority of 256 seats. To put that in context, Labour had 202 MP’s when the election was called. Tony Blair had a 179 seat majority, so this would be an unprecedented situation. In light of this, Nathan focused his talk on healthcare policy under the Labour party and their appetite to work alongside businesses in the sector.
Pay and benefits seemed a good place to start. Commitments have been made to increasing the minimum wage specially for social care workers, as well as providing access to sick pay and parental rights from day one. There’ll be stronger income protections for workers, and it would also in effect end zero hours contracts. Whilst no one in the sector is against the idea of paying more to care workers there is a worry about the affordability of it, particularly for the local authority end of the market.
Labour has remained committed to the £86,000 CAP on personal care that is already on the statute books. Originally introduced by Boris Johnson in 2019, Labour remains committed to this taking effect from October 2025.
There’s still some policy work to be done by government on how that cap will interact with luxury care segment. For example, the difference between the accommodation cost of care home fee and personal care cost. All of which will impact on providers and how they structure their costs.
Other related policies include the shake-up of how GP’s are structured to end the partnership model. The idea being to shift more of the acute budget from the NHS into primary care. There’s interest in the Singaporean model of polyclinics, where you have neighbourhood health centres, bringing together doctors, nurses, care workers, physiotherapists, other kinds of care, mental healthcare and pharmacists all under one roof. A clear focus on healthcare in the community keeping people out of hospital.
Labour is also focussing on prevention. From looking at banning fizzy energy drinks through to mental health support services for people with gambling addictions.
In England, Integrated Care Systems (ICSs) are here to stay, but with a bigger focus on accountability and making it easier for the NHS to procure goods and services more quickly at scale and centrally. So, if NHS England feels something is good and should be rolled out everywhere you won’t have to get in and sell to every individual ICS, it can be done centrally. That’ll really speed up adoption.
CURRENT HEALTHCARE M&A TRENDS: DR LEONID SHAPIRO
A qualified medical doctor and former senior McKinsey consultant, Leonid now leads management consultancy Candesic. Specialising in healthcare and social care, Leonid was perfectly placed to discuss the current M&A landscape and what buyers are looking for.
In terms of M&A activity the landscape very definitely splits into a pre and post Covid world. Covid was a tipping point with more investors realising not only the importance of health and social care but also that the sector provides opportunities. Big deals of £1.5+bn were taking place. Though in the last 12 to 18 months there’s been a bit of a lull in activity. However, Leonid’s prediction is that in the next six months the pipeline of big deals coming to market will pick up. So far, 2024 is looking promising in terms of the capital invested by PE firms in the UK. For the sub £5m EBITDA market, the deal pipeline is looking particularly strong in healthcare services. Average EBITDA multiples in healthcare over the past 18 months have ranged from 5x in medical devices and consumables to 14x in diagnostics.
Valuations and interest rates have had a real impact on M&A activity. Hopefully once the UK election is out the way interest rates will start to be lowered by the end of this year. Helping to kick-start further bank financing.
It’s worth noting that whilst elections cause big uncertainty the markets cope. Very often it’s just about having the outcome sorted one way or another. Having firm policies on paper and starting to be implemented will enable sellers to have more confidence. Once the direction of travel is set, sellers are more likely to bring their businesses to market.
Leonid’s concluding remarks were positive for everyone in the room. Even with the UK election, international investors continue to see a wealth of opportunities in the UK’s healthcare sector. The UK offers most of the key attributes they seek in an investment. From strong management teams through to businesses offering a well-defined market niche or competitive advantage with strong relationships with the NHS. The future, whatever the outcome of the election, will still see the NHS continue to rely upon the private sector.
QUESTIONS FROM OUR GUESTS
If our speakers could change one thing in health and social care, it would be:
- Dr Leonid Shapiro: Clear waiting lists. These things take time and need structural solutions including time, training and money. Potentially using private sector international providers. Make the hard decision. Spend the money so that we can get back to some semblance of normality.
- Emma Barnes: Contract reform. The issue of dental contracts has been sitting with several governments. It’s archaic, and that’s one of the reasons why we don’t attract new dentists to the UK.
- Andrew Wood: Get people out of hospital beds. There’s bed blocking still in the system. Currently there are something like 10-15,000 patients sitting in hospital who are fit to be discharged.
- Nathan Hollow: Professionalise social care work so that people are paid well. We’d resolve the constant turnover rate and vacancy rate. We `need 25% more care workers in the next decade which is a problem and impacts on waiting times and bed blocking.
Other questions from the floor included:
Q. How much can more funding fix the situation?
Dr Leonid Shapiro: Funding does need to be allocated to clear the backlog. Then the system will be in a better position to cope. The system isn’t perfect but there are definitely opportunities to make it more efficient. Some of the issue relates to people’s pathways into the NHS. If it’s the best route for the individual, we need to move care into communities away from hospitals. It’s a more cost-effective route. There are inefficiencies that some companies are trying to address through digitalisation. For example, through appointment management.
Q. How could AI and technology enhance the ability to deliver services more efficiently to all people?
Emma Barnes: It’s exciting as the technology is already there but it doesn’t fit the NHS funding model. For example, from the dentistry perspective there are opportunities from a preventative point of view that’s being used in private practices. Rolling out the technology to NHS dentists could be a game changer.
Andrew Wood: AI could really help when it comes to home care. For example, care workers may be making repeat visits and making extensive notes of what they’ve found and what they’ve done. AI can be used to identify common themes and spot potential problems before they happen. At the moment we’re too reliant on human beings being able to spot issues and join the dotes. Home tech is also a growth area. Tech can be used to monitor whether service users are sedentary. If they’ve wandered out the front door and left the door open. We’re not there in terms of adoption but it won’t be far off.
GET IN TOUCH
As a team, Cooper Parry has years of experience advising on healthcare transactions and getting deals across the line. We know the UK buyers, have a fantastic overseas network to find overseas buyers and really enjoy working with brilliant entrepreneurs, who have a passion for providing the highest quality of care.
Our team advises business owners on identifying and executing business acquisitions; raising private equity; selling their business (when the time is right); getting “exit ready” and completing legal, financial vendor or buyside due diligence on acquisitions.
If you’d like to know more, or would like to join our next event, get in touch.
