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Healthcare focus: confidence, compliance and the Brexit effect

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In early April, BCMS hosted an evening event in the offices of law firm, Mills & Reeve, in the City of London. The event, entitled Growing and Selling a Healthcare Business, was designed to help provide business owners in the healthcare sector with guidance as to how to prepare their businesses for sale, including best practices and pitfalls to avoid. The event featured a panel of experts that included Natalie Wade, Healthcare M&A Partner from Mills & Reeve, and Jonathan Dunn, Managing Director of the BCMS Major Transactions Group. We were also privileged to have Bob Goldsmith, President and CEO of BCMS North America, on the panel. The North America office recently won the Healthcare and Life Sciences Deal of the Year (over US$100mm) category at the M&A Advisor Awards in New York, so Bob’s presence was of particular relevance.

In addition to the panel experts, we welcomed three business people and former BCMS clients who have already experienced the healthcare sale process. Father and daughter team, Hugh Graham and Fiona Roberts, who sold their leading serology/blood group testing business, Inverclyde Biologicals, and Gordon McQuilton, MBE, who sold his specialist seating and mobility company, Specialised Orthotic Services, in 2015.

While all business sales are unique, healthcare businesses often have an additional layer of complexity concerning compliance issues, regulation and funding. The two BCMS directors, Jonathan Dunn and Bob Goldsmith, were able to advise business owners based on their own experience in the healthcare space, and Natalie Wade was able to impart valuable advice from a legal perspective.

Overriding confidence among healthcare business owners

The event was held less than a week after prime minister, Theresa May, triggered Article 50, starting the process of Britain’s leaving the European Union. The healthcare sector has frequently been cited as one of the sectors likely to be strongly affected by ”Brexit”; loss of research funding from EU-based sources and of EU-based staff (which will particularly impact nursing and social care) will be major issues affecting the sector. Furthermore, following a decrease in regulatory certainty through the loss of British influence over the European Medicines Agency, owners of healthcare businesses are justified in feeling concerned. However, these concerns did not overshadow the event; nearly two-thirds of attendants believed that prospects for the sector remain strong, with 17% believing Brexit would have a positive effect on the industry.

Brexit Healthcare

Retirement remains the main reason for sale

As we find with our clients, motives for sale tend to be diverse – and it was no different with the attendees of the day’s seminar. Nearly half of those attending (43%) cited retirement as their main motive for looking towards business succession, with lifestyle/family reasons taking second place. Usually, lifestyle change is the top motive for sale among business owners, but it is notable that, in areas where there is a high proportion of healthcare businesses (such as Cambridge), retirement tends to predominate as the reason for sale, suggesting that owners of healthcare businesses are more likely to grow and develop their businesses over their working lives. It will be interesting to see if this trend changes as fast-growth med-tech businesses continue to take root in the healthcare landscape.

Business succession plans

Niche need not mean undesirable

Many healthcare owners – and the two businesses represented in the room were no exception – perceive their businesses to be very niche. In a field such as healthcare, with so many different applications, this is hardly a surprise. However, while a business may be niche, it certainly doesn’t mean it is necessarily less attractive to a potential acquirer. The owners had assumed that, because of the unique nature of their respective propositions, very few companies would be interested. The reality couldn’t be further from the truth, however, with both businesses selling to buyers of which neither owner had previously been aware, from an initial list of over 150 potential acquirers for each. BCMS takes an agnostic approach to finding buyers, which frequently means the ultimate purchaser comes from off the client’s radar.

We left buoyed by the positivity of business owners, but also excited by the potential of the individual businesses within the room, regardless of whether or not they decide to sell in the near future. The healthcare market may be vulnerable to Brexit, but it also has the strength in depth to override any economic uncertainty: growing demand for healthcare services, a hotbed of scientific talent, and a world-class public health service all provide the sector with a huge long-term opportunity.

To read more, download the M&A Healthcare Focus here


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Posted Apr 2017
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