UK healthcare sector weathering Brexit storm

Political uncertainty following the UK’s decision a year ago to leave the European Union appears to have had little effect on confidence in the healthcare sector, new research from Catalyst Corporate Finance reveals, with investment activity little changed since the Brexit vote.

Some 103 companies in the UK healthcare sector were acquired during the first half of 2017, Catalyst’s data reveals, while a further 70 businesses received investment funding. The figures are barely changed from the same period of last year, when 104 companies were acquired and 76 secured funding.

Moreover, Catalyst’s data shows that in many healthcare sub-sectors, deal activity actually rose during the first half. For example, some 42 facilities businesses were acquired this year against only 31 in 2016, while there were seven transactions in the pharmaceuticals sub-sector, against four during the first half a year ago.

The data also reveals that Brexit has not deterred overseas investors from backing UK healthcare companies. Some 31 UK companies were sold to overseas bidders during the first half of the year, compared to only 28 during the same period of 2016; similarly, 20 companies received funding from overseas investors in the first half of this year, the same number as in 2016.

Justin Crowther, partner at Catalyst Corporate Finance, said the data reflected continuing confidence across the healthcare sector, with a broad range of businesses and investors still active in the market. He said, "Deals have been driven by a diverse set of factors, including private equity consolidation in fragmented markets such as dental; sales by large corporates of non-core divisions; interest in growing specialist healthcare businesses such as GE Healthcare's acquisition of fetal monitoring technology business Monica Healthcare; and interest from overseas companies in Europe and beyond, including both financial investors and strategic buyers."

Crowther said that while the healthcare sector faced challenges, there were also reasons to be optimistic about the outlook. “Whether the recent election result and the fact that we are now properly engaging in the Brexit process has an effect on confidence and M&A activity, only time will tell, but these are potential headwinds,” he said. “Ironically, the general election result may actually result in a slight loosening of the public purse strings, which might help some parts of the healthcare sector.”

Crowther added: “It’s difficult to predict how political and economic uncertainty will play out, but the macro drivers for M&A in healthcare are strong and liquidity remains.”