Healthcare

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How much are companies worth in the Healthcare sector?

The following 3 graphs will give private business owners a broad indication of the value of their business:

1. The Enterprise Value to EBITDA* multiples on which comparable listed companies are trading

Healthcare TMT v3 graph 1


At the end of H1 2019, the global, all market average Enterprise Value to EBITDA* multiple for listed healthcare companies was 15.5x. This was slightly greater than the previous six months and slightly up on the previous year, when listed healthcare companies were trading on a multiple of 15.1x. Within the healthcare sector, trading multiples varied between 7.6x and 16.3x across the range of sub-sectors. Smaller businesses generally traded on lower multiples.

* EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation
† Note, the Enterprise Value to EBITDA multiples above are for listed businesses, and it is generally the case that privately owned businesses are valued at a discount. Listed company data was accurate at 01/07/19

2. The multiple of EBITDA paid by acquirers of comparable businesses

Healthcare graph 2 reversed


The average multiple of EBITDA paid globally in healthcare transactions has  remained fairly steady over the past few years. It currently stands at 11.9x. When reviewing these multiples we break out  businesses in the range $5-150m, as they tend to have unique attributes which affect their valuation. Smaller businesses have generally been sold on lower multiples.

3. The volume of M&A transactions and acquisitions

Healthcare graph 3 reversed


In H1 2019, there were 1,074 transactions globally in the healthcare sector. This is down on the preceding 6 months, when there were 1,215 transactions. Although slightly declining over the last few years, the number in the last 6 months suggests demand for healthcare businesses remains fairly buoyant.

 

For further information as to how these valuations and statistics are computed, and their impact on your transaction, please contact us.

Key healthcare market themes:

1

Consolidation becoming a requirement

Consolidation has been a key trend in the first half of 2019 as smaller hospitals, pharmaceuticals and care systems have suffered from declining reimbursement, increased operating costs and competition with larger institutions. The rising costs of effective R&D has also meant that to compete, smaller pharmaceuticals have been forced to scale up.

2

Technology takes a front seat

The healthcare sector is seeing new technology beginning to play a more active role in the operation of hospitals, pharmaceuticals and bio-tec. This technology includes AI in diagnosis, treatment and surgery, blockchain technology in the management and safeguarding of hospital patient data and improved data collection and analysis.

3

A change of focus to biotechnology

A report by S&P shows M&A deals, centred around gene and cell therapy in Q1 has changed focus to that of biotechnology in Q2 of 2019, as firms look to expand their product pipelines. The quarter saw the $84 billion acquisition of Allergan PLC by AbbVie.

4

Aging population facilitating growth

A key driver for M&A in the healthcare sector is the continuing ageing population. With long term care accounting for a significant portion of M&A deal activity, the resulting increased medicine requirement and time spent in care is aiding in sector growth.

5

Consumerism hits healthcare

Increased consumerism in the healthcare market has seen consumers seeking lower costs and increased convenience from their care providers. This has been further emphasised as online GP consultation options have become available as seen on the NHS and private companies.

6

MDR deadline approaches

As the MDR deadline for certification of medical devices is just a few months away, there is real concern around whether suppliers will be able to gain approval for many crucial products given the sheer scale of the operation. With only the largest of suppliers in possession of the resources to accommodate the EU directive, a strong trend of consolidation in the few months lead up to the deadline may be expected.

Data sources compiled by Corbett Keeling