Politics put the brakes on private equity takeovers in healthcare

Time and again, healthcare ministers refused to ban private equity in the sector.
Yet political sentiment influenced investor activity.

Investment companies from home and abroad were less active in healthcare acquisitions last year. The total number of transactions fell only slightly, and so the role of public parties grew. Partnerships between privately funded healthcare providers also gained ground, notes consulting firm JBR in a report published Thursday.

The Alrijne Hospital in Leiden. A failed takeover at that hospital had consequences for healthcare. Photo: Dylan Nieuwland/ANP

The retreat of private equity has everything to do with the negative sentiment in politics in The Hague surrounding these buyers, says co-author Caspar van der Geest. This also deters foreign investors: 'If you look at the Dutch market from a distance, this is the theme you see.'

For some time now, there has been a majority in the Lower House in favor of all kinds of measures, and even a ban on private equity in healthcare. Successive cabinets have consistently rejected such an intervention as unfeasible and undesirable.
In practical terms, then, little has changed. And yet this critical mood has repercussions, says Caspar van der Geest. 'It translates, for example, into the requirements of municipalities for profit distributions. It remains to be seen whether that is legally tenable, but investors see it as a risk if care providers depend on municipalities as financiers for a large part of their turnover.'

On the other hand: a ban, or something in that direction, is not in the short term. This year investors are more active again, observes Caspar van der Geest. 'In mental health care, for example, it is very dynamic. They all waited, because results were under pressure because of a new collective bargaining agreement and a new financing model.'
All in all, the number of healthcare acquisitions fell slightly from 2023. The last four years have seen limited fluctuations. There was a notable increase in long-term care: 39 transactions, up from 25 a year earlier. These were mainly acquisitions by large private players and collaborations between foundations.

Number of healthcare acquisitions fairly stable, jump in long-term care

Transactions approved by Dutch Healthcare Authority

©FD Source:JBR

For private equity, long-term care is a difficult sector, says co-author Thomas van Amerongen. There is a ban on profit distribution by care providers. Separating care and real estate operations has created a revenue model after all. But real estate, again, is not the favorite activity of private equity.

Acquisitions in eye care

Oral care and pharmaceuticals are precisely care areas where investment companies have been very active for years. The biggest boom in oral care seems to be over, although there were still 56 takeovers last year. In pharmacy, there were 34. Notable is the activity of two chains in eye care: Oogwereld from AAC Capital and EyeCare from British EMK Capital. These parties each reported seven acquisitions last year.

There are also corners where the very silence is striking. In diagnostics (especially blood testing laboratories), for example, there were only two acquisitions. Just a few years ago, JBR predicted a major consolidation in the sector.

This is not going to happen for the time being, says Thomas van Amerongen. The publicly traded Eurofins and Unilabs of the Danish A.P. Moller Holdingseemed to be preparing for substantial growth. 'They put on too big a pants. Public sentiment was already critical, and then two acquisitions failed. At Alrijne Hospital, that had major consequences for healthcare. Since then, hospitals have been very cautious.'

At the same time, the logic behind economies of scale is unchanged. Diagnostics requires large investments, there is a shortage of qualified personnel and rates are under pressure. Therefore, healthcare organizations are looking for other ways to merge, without interference from profit-oriented private parties.

'Those attempts are not always successful either,' says Thomas van Amerongen. 'And they do come about under pressure from the presence of investors.' The exact organizational form is less relevant, according to the consultant, and with it the discussion about public or private money. 'What matters is who keeps care running.'

For its annual survey, JBR counts all acquisitions approved by the Dutch Healthcare Authority. There are also transactions that are so small that parties do not have to report them, but most sales of dental practices, for example, are included.

Source: FD - Politicians put the brakes on private equity takeovers of healthcare.

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