In times of financial turbulence, investors often turn to safe havens. Such investments target markets where demand is likely to remain constant despite changes in people’s’ income – what some would term goods with ‘perfect income inelasticity.’
One such good, with the occasional exception, is the healthcare sector, and private equity firms have been pouring into health and wellness with abandon.
In the latest of such moves, Bowmark Capital are rumoured to be making a £75 million move to buy Helsey North, a firm specialising in providing care for autistic patients.
The corporate investment firm Hawkpoint’s research suggests that three of the 12 £100 million plus private equity deals made in the last six months were in fact in the healthcare sector.
Guy Hand’s Private Equity firm Terra Firma made a huge £825 million acquisition of Four Seasons healthcare provider at the end of April, and Omers Private Equity have also been involved, purchasing Lifeways, a firm that sells products and services to adults affected by learning difficulties.
The sector is familiar to Bowmark, who have a strong track record in healthcare investment. Having sold Kisimul, a firm which provided services to children affected by learning disabilities to Rothschild last year, was followed by a foray into the fertility sector with the purchase of The Fertility Group, one of Britain’s largest in its sector.
There are occasionally moral problems that arise from running healthcare companies for profit. Recently, the implosion of Southern Cross, owned by the US private equity group Blackstone led to David Miliband, the leader of the opposition, branding them as “asset strippers.”
Indeed, given Britain’s extensive and rapidly improving National Health Service, many commentators don’t see that the industry has much potential for growth.
Nevertheless, private equity firms have been tipped as the favourite sector to come in and manage Castlebeck, a rehabilitation specialist for vulnerable individuals. The firm is for sale, and with private equity in pole position, we could see a further acceleration to what is already a clear trend towards investment in essential services that are largely recession-proof.