The ‘catch up’ effect

With an international lockdown and healthcare services streamlined to focus attention on the crisis, there was a huge impact across all supportive services, from elective surgeries and non-essential appointments such as dentistry, through to new residents in care homes. This, in turn, led to subdued M&A activity and valuations due to the ongoing element of uncertainty. [1]

However, as restrictions are lifted and society reopens, there has been a swift return to those areas. As an essential service, the need for care remains unchanged and therefore the sector is experiencing a ‘catch up’ effect, with those previously neglected areas ramping up again. This is evident across markets; in India for example, recovery has been swift and private hospitals are looking at 20% growth by 2022. [2] Likewise, Europe has seen a similar surge, with over half of capital invested in H1 attributed to healthcare, biotech and ICT. [3]

This resurgence has validated healthcare service assets as a defensive area for investment, offering significant downside protection for investors. The operational risk, whilst high for certain sectors, can be, to a degree, mitigated against and is largely outweighed by the possible long-term value creation. Coupled with the fact that long-term positive tailwinds for healthcare services remain largely unchanged, this resurgence provides clear visibility for investors and has already led to a high volume of activity in the area. In France for example, KKR have invested in Elsan, an operator of private hospitals and clinics, with a deal value of 3.3 billion euros [4], demonstrating that key markets are taking advantage of the quick recovery.

Growing investor interest

As the perception of healthcare assets evolves, more infrastructure investors are looking closely at this sector. The macro trend of an ageing population and the sector’s demonstration of its vital importance during the pandemic as well as the consistency healthcare services are providing in a turbulent economic environment, has reaffirmed and increased the sector’s attractiveness to infrastructure funds and long-term funds. In addition, healthcare services add favourable diversification to typical infrastructure fund portfolios.

Key infrastructure characteristics that have continued to attract investors to this sector include:

  • Essential services with high barriers to entry
  • Secure, resilient funding in key sub-sectors
  • Predictable long-term value, with favourable market demographics

Infrastructure fund interest in certain healthcare sub-sectors is continuing and is helping to accelerate the increase in valuation for assets; typically infrastructure funds require returns between 10-15% compared to their private equity counterparts at 20-25%. [5] In some markets, infrastructure fund interest has been evident for years - for example in France, Antin Infrastructure acquired Almaviva Sante in 2017. [6] However, in other markets, this is a relatively new concept - in October 2020, Macquarie acquired Viamed Salud, a Spanish healthcare group. [7] In addition, I Squared Capital looked to expand their portfolio by acquiring German elderly and specialist health care homes, Romergarten. [8]

Consolidation of casualties

Unfortunately, like many sectors, healthcare has not been entirely without its losses - the global lockdown meant that many support care services were not able to operate. This led to some groups being unable to sustain themselves, despite government support, e.g. Dentix in Spain. [9] Consolidation activity has, therefore, begun to increase across the sector, as larger groups look to absorb struggling smaller rivals. [10] In the UK, in particular, healthcare services are being obtained by private equity firms not only as a real estate asset, but also from an operating perspective. [11] With the real estate providing a secure platform from which to raise debt, and the operational aspect looking to provide long term value, there has been an influx of healthcare deals in this space. [11]

Looking forward to 2021 and beyond, we believe consolidation, particularly in some segments of the industry, is also driven by the desire to diversify end market exposure and allow for access to new audiences around the world. In India, where the market is evolving quickly, this is already being seen; the recent acquisition by Manipal Health of Columbia Asia, a hospital chain, is a good example of this evolution. [12]


Healthcare services had been undergoing a perception shift even prior to Covid, and the pandemic has only served to accelerate this while also underlining its attractiveness as an area for investment opportunities. Once dismissed by some as a low growth area of opportunity, its robust and resilient business models are now in favour in the current uncertain environment. And in its pivotal, headline-grabbing role during Covid-19, the demonstration of its key attractive qualities has been thrust into the spotlight.

We expect to see increasing levels of activity across markets in this space as the effects of Covid-19 make themselves more apparent, not only for companies, but also for the population. Healthcare services will likely play a vital role in supporting these next steps, and therefore, we believe investment in this area will rise – driving M&A activity with it. And as infrastructure funds continue to invest into this sector, it will be an exciting and interesting area to watch.


[1]Deal or no deal: The M&A landscape, GAM Investments, June 2020
[2] Healthcare sector to bounce back with 20 growth in revenues. Times of India, October 2020
[3] European Private Equity activity registers resilient fundraising and investment, Private Equity Wire, November 2020
[4] KKR officialise son arrivée prochaine chez Elsan, Les Echos Capital Finance, July 2020
[5] European Infrastructure Strategic Outlook 2020, DWS, January 2020
[6] Antin Infrastructure Partners strengthens its presence in social infrastructure with the proposed acquisition of Almaviva Sante from UI and Gimv, Antin Infrastructure Partners, October 2017
[7] Macquarie acquires Spanish healthcare group Viamed Salud, Leaders League, October 2020
[8] I Squared Capital launches elderly care platform in Germany, Private Equity Wire, November 2020
[9] Spanish dental group files for bankruptcy, Majorca Daily Bulletin, October 2020
[10] Healthcare M&A Outlook – De-risking through self-reliance and market consolidation, Mergers Alliance, September 2020
[11] Healthcare deals in UK swell as investors seek ‘safe haven’, Financial Times, November 2020
[12] India: Manipal Health acquires Columbia Asia hospitals, LaingBuisson, November 2020