Healthcare, which is one of a few sectors leading the current resurgence of deal making activity in Australia, has been a top-performing sector in Australian Mergers and Acquisitions (M&A) and Venture Capital (VC) activity over the last 14-years, achieving the second highest growth rate of all industries year-on-year after Information Technology.
William Buck’s M&A and VC Report 2021, which is based on extensive research into M&A activity in Australia over the last 14 years, demonstrates an increase in the aggregate M&A transaction value (for middle market transactions) of the sector in seven of the past 14 calendar years.
The report also highlights increased activity in transactions under $100 million and peak aggregate values of $804 million in 2008, following the GFC, and $979 million in 2015.
Accounting for an average of 5.56% of the total aggregate transaction value within the Australian M&A market across this period, the sector has proven to be key to the Australian market and one which is expected to see further growth in the wake of the pandemic.
Healthcare and the current resurgence of deal making activity
As Australia began to emerge from the pandemic earlier this year, we saw appetite for deal making increase, with healthcare one of the sectors leading the resurgence in deal making activity, and accounting for a large portion of Mergers and Acquisitions and Venture Capital activity in the first half of this year.
We expect to see this trend continue into 2022 at least, with a double dip recession unlikely despite a recent return to lockdowns.
While many factors are coinciding to drive a resurgence of deal making activity, including lower interest rates and higher business optimism, delayed deals being revisited and companies pivoting to accelerate growth through the acquisition of new businesses or strategic mergers, Coronavirus has offered a unique opportunity for healthcare, a sector which has become paramount to economic recovery.
Our report recognises that significant regulatory changes to the way services are provided will likely mean that smaller, independent practitioners without equity backing could struggle to adapt. Business will seek out capabilities with an increased uptake of digitisation and new care models (telehealth, telemedicine and innovative homecare), which could lead to increased M&A activity.
In addition to this, the healthcare sector is forecast for an annualised 2% growth over the next five years, and we expect it to account for more of the total aggregate transaction value each year. This growth is in part due to the ever-rising aging population in Australia, with the number of individuals aged 50 or older expected to increase as the baby boomer cohort ages. This is likely to increase demand for health services, with people aged 65 and over expected to account for over 30% of health services revenue, despite making up around 15% of the population.
What does this mean for practice owners? It’s a promising time to be a practice owner, with accelerated growth on the horizon meaning greater profitability for your business, and an uptake in digitisation meaning there are opportunities for increased efficiencies.
If you’re planning an exit, many companies are demonstrating a willingness to thrive by choosing to acquire new businesses to improve supply chains, undertake strategic mergers or pivot in terms of product and service offering. Others are looking to make acquisitions due to the challenge posed by organically growing their business to justify market valuations.
While bottlenecks remain in the form of state-wide lockdowns and disruptions to supply chains, strategic and opportunistic buyers will take advantage of this period.
For more information on planning your healthcare exit, contact your local William Buck Health specialist.
You can read our full M&A and VC Report 2021 here.