Corporate Intl Magazine – April 2010

« Consultancy

Healthcare due diligence in the UK

Due diligence is growing increasingly important across all sectors of commercial activity, as buyers become more cautious of spending money without an in depth study of a potential purchase.

There is a significant amount of active investment in the healthcare sector at present, in areas such as primary care, private hospitals and independent care homes and investors need to partner with specialist due diligence providers in order to make sure they invest wisely.

LCS International Consulting provides commercial due diligence right across the healthcare service sector and undertakes a broad range of consultancy and research projects for large and small client organisations in the UK and a number of European countries. LCS has specialist knowledge and experience in private hospitals,

independent care homes, assisted living, domiciliary care, acute psychiatric services, supported living and primary care businesses, medical devices, health IT, telehealth and telecare, specialist schools, child fostering and diagnostic centres.

Paul Saper, managing director at LCS International Consulting, says that the greatest activity recently has been in Opco/Propco deals, particularly in the UK.

He said: “Private equity still remain less active than in the past, however there is the prospect of an upturn in the second half of the year as vendors’ expectations become more in line with what buyers are willing to pay.

Health and Social Services, although unlikely to experience the same sharp downturns as other sectors in the economy, are still facing periods where their level of growth will be less than in the past, because governments across Europe are having to cut back on public expenditure.”

He added: “Against this background, Opco/Propco deals are still likely to continue with new specialist funds entering the market and factoring in the tighter market conditions in the next two or three years.

Not only are investors looking for a safer home for their money, but providers are also seeking alternative funding as banks are lending less in markets across the board.”

Mr Saper says that LCS International has experienced this trend, in the past, in the mid 90s and again at the beginning of the ‘naughties’.

As in previous times, the UK and Europe are again following trends in North America and the Pacific Rim countries.

He said: “The big market trend is, of course, private equity moving east, and the international players will be looking more and more to build up their presence in countries like China, India, Russia, Mexico, and Brazil.

Nevertheless, there will be increasing opportunities in Eastern Europe, and the recent 3i sale of their primary care business in the Nordic countries and Poland is a good illustration.

We also expect new investment in the UK if, as expected, we have a change in Government after May 6th.”

The greatest challenges in the medium term, for commercial due diligence providers like LCS, is to gauge where the markets will be in three to four years time, the impact on the markets of new medical devices and the changing priorities of the consumer.