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Fast-growing home healthcare businesses see new deal-flow highs

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This dynamic sector is already attracting financial investors, private equity houses and trade buyers looking to generate higher returns from buying up and investing in home healthcare companies so business owners looking to sell can command high multiples.

Following a similar trend to the previous year, the last two quarters of 2013 saw the highest deal activity in the broad healthcare sector (pharma, medical and biotech), resulting in it taking a 6.8% share of total M&A value in Europe.

A total of 351 deals in 2013 bred 27.2bn in deal value compared to 312 deals in 2012 totalling 21.7bn. The volume of deals in 2013 was the highest since 2007 and suggests that the sector has become increasingly active with more deals happening in the mid to lower end of the market.

In the home healthcare market we have seen some high profile deals in the last couple of years, namely Anchorages 80m investment in New Century Care, the trade sale of Enara to Mitie Group Plc for 111m and Interserve Plcs acquisition of Advantage Healthcare for a cash consideration of 26.5 m.

Recent statistics from the United Kingdom Home Care Association (UKHCA) reveal that, despite cuts to local authority budgets, individual users are receiving an average of around 364 hours of homecare, an increase of 18% since 2006-07.

There has also been a significant transition in the provision of services with the independent sector now offering an even broader variety of care options, providing 89% of publicly funded homecare compared to only 5% some 20 years ago. The market remains highly fragmented giving potential buyers a greater array of companies to target.

The most significant factor driving demand for home healthcare is the UKs aging population, coupled with increasing levels of obesity and diabetes. Data from the Office for National Statistics (ONS) shows that the number of people aged 65 and over has increased by 20 per cent in the last 25 years to over 10 million.

This trend is predicted to continue, with those aged 65 and over expected to account for 23% of the total population by 2035; a level that will continue to fuel the need for home healthcare services.

Furthermore, with the latest figures from The Health and Social Care Information Centre showing that the number of adults overweight including those who are obese increased an average of 8% between 1993 and 2011, the strain on healthcare services will only increase.

Innate demand is another factor fuelling the home healthcare sector, as patients consider such provisions crucial in helping them to continue with normal daily life. Home healthcare providers are facilitating this demand by offering an increasing array of care options; from personal care and home management to post-operative treatment and mental health support.

The array of mobile healthcare devices is also rising; from tablet apps and GPS location devices to mobile sensors and monitoring systems, which all helping patients to lead more independent lives.

The rise in biological medicine, for the treatment of conditions such as rheumatoid arthritis, has also led to a growing need for patients to receive care at home. Such medicines require additional monitoring and supervision, but are crucial for the effective treatment of a number of conditions.

For the NHS, meeting the growing demand for care is becoming increasingly difficult, as the pressure to cut costs continues. A Bupa healthcare report has identified the opportunity for the NHS to save up to 1.7bn through the greater implementation of home healthcare; a saving that could significantly help meet financial targets.

Furthermore, with hospital bed space at a crucial level, the potential of saving 14.5m bed days by moving patients into the home as soon as it’s medically safe to do so, could also be of great benefit to the wider economy.

The growing demand for home healthcare is predominately being facilitated by the independent sector, with prominent care providers such as SAGA Homecare, Healthcare at Home Ltd, City & County Healthcare Group, Active Assistance and MiHome Care, broadening their services to include a variety of care options including; fall prevention, live-in care and cancer treatment.

Innovation in mobile healthcare devices; such as the iWander app, originally developed for patients with Alzheimers disease or dementia, and the HomeTouch app, designed to help reduce patient isolation and to assist patients with their medical treatment, are also playing an important role in supporting patients to receive care at home.

MyClinicalOutcomes, developed to help doctors monitor patients remotely, is also helping to facilitate care for patients suffering with long-term conditions.

Medical sensors, such as the MEMs accelerometer which can alert medical professionals when a patient falls, are particularly valuable for older, vulnerable patients who wish to retain their independence but have support on stand-by.

The cumulative impact of all these forces is fuelling the sectors very high growth levels within the home healthcare industry. For businesses operating in this sector, 2014 would be an ideal time to reap the rewards of this expanding market as potential purchasers seek to buy up companies and expand their presence in the home healthcare industry.

Gordon Hamilton is a partner at Cavendish Corporate Finance

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