Overview of healthcare private equity investment in the UK
Private equity investment into the UK healthcare sector remains strong, with appetite to invest into various segments of the market including clinical services, specialist care, medical products and digital health.
The sector's non-cyclical nature and resilience throughout pandemics and economic turmoil has made it increasingly attractive to investors, which has expanded the options available to business owners in the market.
Why should healthcare business owners consider private equity?
Private equity investment provides a flexible solution for healthcare business owners, which can be used to meet a range of objectives including:
Business owners extracting value in order to "de-risk" whilst maintaining an equity stake in the business to benefit from future growth;
An injection of funding in order to support the growth plans of the business;
Passing the business onto the management team by way of a management buy-out with the use of private equity funding.
What size of businesses do private equity invest in?
Lower mid-market private equity houses are generally focused on businesses with EBITDA in excess of £3m, however there is a growing range of investors covering the £1m to £3m EBITDA range.
Do private equity take a majority or minority stake?
Historically private equity houses were almost exclusively focused on majority equity stakes, but this has changed significantly over the last decade.
Whilst certain funds still insist on a majority position, most are now much more flexible and are willing to invest for a significant minority stake. As a result, healthcare business owners can take on private equity investment whilst maintaining majority ownership and control of the company.
Equity stakes taken by private equity generally range from around 30% up to full 100% acquisitions.
What do private equity look for?
Attractive business in a growing market
Stable or growing market with positive future outlook
Limited political or economic risk in the market
Differentiated business proposition to competitors in the market
Profitable, generating in excess of £1m EBITDA
Established business, with a track record of delivering growth over a number of years (i.e. not a start up showing exceptionally high growth rates over a short period)
Strong and investable management team
Private equity are fundamentally backing a management team to deliver a growth plan
It’s therefore essential that the management team is equally committed to the future growth of the business
Most management teams in private equity-backed businesses consist of a CEO, CFO and 1-2 further members (e.g. CCO, COO)
Private equity will generally appoint a Non-Exec Chairman to the board with relevant experience to support the broader management team
Where key members of the management team are not existing shareholders “rolling over” value, they are incentivised via “sweet equity”
Credible five year plan to deliver the required returns
Private equity deals are generally structured around an IRR of >20% and a money multiple of >3x over a 4-5 year period
A credible five year plan with granular forecasts is therefore key to underpin private equity’s investment
This includes an integrated financial model (P&L, balance sheet, cash flows), to support a formal business plan document
Preparation of these documents in advance of engaging with private equity is highly beneficial in ensuring the process is efficient
Due diligence will take place over the business plan and model from a commercial and financial perspective
Who are the healthcare private equity investors in the UK?
The UK has a highly developed and diverse private equity landscape. Some of the most prolific healthcare-focused private equity investors are as follows:
PE House | Website | Investment criteria |
Agathos Management | Businesses valued up to £25m | |
Apiary Capital | Businesses valued £10m-£75m | |
Apposite Capital | Mid-market focus with a £200m fund | |
Archimed | Equity investments of €10m-€1bn | |
August Equity | Equity investments of £15m-£40m | |
Bestport Private Equity | Businesses valued £5m-£40m | |
BGF | Equity investments of £2m-£20m | |
Blixt Group | £1m-10m EBITDA businesses | |
Bridges Fund Management | Equity investments of £10m-£30m | |
CBPE | Businesses valued up to £150m | |
Elysian Capital | Businesses valued £20m-£100m | |
Foundation Investment Partners | Lower mid-market focus | |
G Square Capital | Businesses valued up to €200 million | |
Graphite Capital | Businesses valued £30m-£150m | |
Great Point Partners | Equity investments of $7m-$50m | |
Kester Capital | Businesses valued £10m-£100m | |
Key Capital Partners | Businesses valued £5m-£50m | |
LDC | Equity investments of £5m-£50m | |
Literacy Capital | £1m-£10m EBITDA businesses | |
Limerston Capital | Businesses valued £20m-£200m | |
Livingbridge | Businesses valued up to £300m | |
Lonsdale Capital Partners | Equity investments of £10m-£15m | |
MML | Equity investments of £10m-£70m | |
Mobeus Equity Partners | Equity investments of up to £20m | |
Palatine Private Equity | Equity investments of £5m-£50m | |
Phoenix Equity Partners | Businesses valued up to £200m | |
Queen's Park Equity | Businesses valued £15m-£80m | |
Rockpool Investments | Businesses valued £5m-£50m | |
SHS Capital | Equity investments of £10m-£40m | |
Sovereign | Lower mid-market focus | |
Synova Capital | Businesses valued £20m-250m | |
Vespa Capital | Businesses valued £10m-£75m | |
Waterland | Mid-market - broad range | |
Westbridge | Businesses valued £15m-£50m | |
YFM Equity Partners | Equity investments of £3m-£15m |
How can Eclipse Corporate Finance help?
Eclipse has relationships with all key lower mid-market private equity funds in the UK focused on healthcare. Our relationships with these funds allow us to assess the most likely investors for businesses in different segments of the healthcare market.
We can then support you structuring a suitable deal and providing end to end advice for healthcare business owners going through a private equity transaction. This includes:
Preparation of a five year business plan and financial forecast;
Approaching and managing all dialogue/negotiations with private equity investors
Negotiating heads of terms with the preferred investor (including equity terms)
Preparation of the financial and commercial elements of a dataroom
Management and oversight of the due diligence process
Commercial input in to the sale and purchase agreement
If you are considering taking on private equity investment and are generating EBITDA in excess of £1m, we would be happy to prepare an illustrative private equity deal structure for you.
Please get in touch via info@eclipsecf.com for an initial discussion.