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UK Private Equity-Backed Buyout Deals in the Healthcare Industry – March 2013

by Jessica Hull

  • 21 Mar 2013
  • PE

Preqin’s Buyout Deals Analyst indicates that 2012 was a record year for private equity-backed buyout deals in the healthcare industry for UK-based companies in terms of the number of deals since 2006. 2012 also witnessed the highest aggregate deal value in the UK healthcare industry since the onset of the global financial crisis. In 2012, there were 42 UK private equity-backed buyout deals in the healthcare industry with an aggregate value of €3bn. Over two-thirds (70%) of this aggregate deal value was contributed from the three largest private equity-backed buyout deals that occurred in the UK healthcare sector last year, which also feature in the largest 10 UK private equity-backed buyout deals in the healthcare sector from 2006 to present. These notable deals include the £825mn acquisition of Four Seasons Health Care by Terra Firma Capital Partners, as well as the £465mn secondary buyout of Mercury Pharma by Cinven from HgCapital and the €470mn add-on transaction in which private equity-backed Omega Pharma agreed to acquire the non-core OTC brands of GlaxoSmithKline in Europe.

Investments by buyout GPs are typically held for a period between three to five years before making an exit from the investment most commonly through secondary buyouts, trade sales or initial public offerings (IPOs).  However, due to distress in the global financial markets in recent years resulting in an unfavourable exit environment, the typical holding period of buyout GPs throughout all industries has been extended from an average in Europe of 3.9 years for investments exited in 2008, to 5.5 years for investments exited in 2012. Taking this into consideration, of the 48 UK-based private equity-backed buyout deals that took place in the healthcare industry during the buyout boom period, 63% and 72% of these companies are still active in the private equity firms’ portfolio from those investments made in 2006 and 2007 respectively.

So far this year, there have been only two UK private equity-backed buyout deals in the healthcare industry, which may indicate a slowdown in growth in the number of such investments in 2013. However last year’s record number of UK private equity-backed buyout deals in the healthcare industry is still likely to be an encouraging indicator of the importance of the healthcare industry in the UK economy.

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