Abris Capital Partners for PMR: situation on the market of medical companies through the prism of investments

analiza tablet dlugopis

Ten post jest także dostępny w języku: polski

Recently, more is happening on the market for acquisitions among medical companies. That is why we decided to take a closer look at this topic. Wojciech Lukawski and Sylwester Urbanek from Abris Capital Partners talk about whether the pandemic has influenced investments in the medical industry. The interview with PMR also includes information about the plans for development of the Scanmed network after the acquisition.

How has the COVID-19 pandemic influenced purchasing decisions made by medical companies? Do you notice any trends in this area? Is it to be expected that other funds will invest in this type of activity?

Overall, the pandemic did not significantly affect the increased interest in mergers and acquisitions (M&A) transactions. New acquisitions are being implemented all the time, both in Poland and worldwide. If something has changed, it is surely the way the acquisition targets are viewed and the time it takes to analyse their potential attractiveness.

It is similar in the medical sector. The pandemic has not changed the demographic situation nor has it affected the long-term attractiveness of the sector. Thus, the foundations which make the medical sector considered attractive to investors, including of course investment funds, have not changed.

Whether further funds will invest in this industry depends on several factors. However, first of all, it depends on whether there are further entities that are professionally managed, provide high quality services and guarantee stability to their partners.

In which medical companies are more willing to invest in now and which were more popular before the COVID-19 pandemic?

Certainly, the situation related to the coronavirus epidemic verified the way the individual entities in the healthcare segment were viewed and changed their positioning. Not all specialties within the healthcare sector have been affected by the pandemic to the same extent and this may determine the attractiveness of individual activities.

However, the pandemic will pass. Therefore, no professional investment entity makes purchasing decisions just because COVID-19 caused a sudden but short-term increase in profitability.

The fact is that the current situation has accelerated some of the changes that have occurred in the medical market. Certain segments have become more attractive, in this context, there is a lot of talk today about telemedicine or diagnostics.

In Abris, in the context of our investments, we always look for entities providing top quality services. This is of course critically important in medicine, but we think similarly about investments in other industries and here the COVID-19 has not changed anything in our way of looking at development through acquisitions.

How would you compare the changes in the market for investments in medical companies to other industries?

The current situation has affected many industries. Some of them have been affected by a drastic drop in demand. Most often these are sectors whose services or products have limited availability due to ‘lockdown’. We mean, for example, entertainment: concerts, cinemas and theaters, clubs and restaurants or airlines. For some industries pandemic means forced or accelerated transformation. Examples include training companies or companies organizing fairs and events. New rules of operation mean the transfer of their services to the network. There are also those that have clearly accelerated during a pandemic. Companies in the e-commerce sector or manufacturers of hygiene products can be mentioned here.

In the broader medical sector, we are dealing with similar effects. On the one hand, there is a decline in planned procedures. Visits are cancelled by facilities or patients who are afraid for their own health. Probably in many cases it is only a postponement of demand for a given health service. Therefore, we expect that after the restrictions related to the pandemic have been alleviated, patients in increased numbers will return to be treated again. We also see transformational effects. Among others, in the form of the mentioned telemedicine, which commonly replaces physical visits to clinics. On the other hand, increased demand in the medical industry is visible in the segment of laboratory tests.

To sum up, the medical industry is obviously affected by the pandemic and each of its effects must be taken into account in case of investments. However, the sum of these effects is positive for the sector in the long term.

Do you think that medical companies have an investment advantage?

On the one hand, entities present on the market, provided that they are professionally managed themselves, know better its specificity, know what features the acquired entity must have and what to pay attention to during the due diligence process. They also have the possibility to generate synergies. On the other hand, investment funds are usually better prepared to carry out the process. After all, for them it is a daily bread.

The same reasons that determine the attractiveness of the industry are still “in force”: demographic factors, expected increase in medical expenses, emerging innovations, etc. All this makes investments in the health care industry so popular. However, not every project is a success. It must be remembered that this is a very demanding industry, where the elements are very difficult to reconcile, all the time bearing in mind the great responsibility.

It is also difficult to forget about the challenges facing this industry: the decreasing availability of medical staff, the need for continuous investment in infrastructure and the absolute application of procedures that determine the quality of provided services – all this causes that the exorbitant requirements significantly raise the bar for entities looking for potential investments.

Is the investment in Scanmed the first such big investment of Abris fund on the medical services market? I mean, medical facilities providing health services.

Yes, we have previously invested in entities related to the healthcare sector (both in Poland and Romania), but not those that would directly provide such services.

Are further acquisitions planned in this respect? If so, what companies are you interested in. Are you interested in any specific specialisations, or does the format of the acquired company’s activity count?

We want Scanmed to build an increasingly important position on our market. However, an absolute priority for us is the high quality of our services. We believe that this is the best way to create long-term value.

The size of the business is obviously important. As a private equity fund we understand the benefits of growing scale. Scanmed’s strength is the diversification of its services. As the operator of two hospitals, a dozen or so cardiology centers and several specialist clinics, we are well placed to grow by offering coordinated care programs that are comprehensive and complex and bring the greatest benefits to patients.

In your opinion, what are the prospects for development of the private healthcare market in Poland? Which segments (subscriptions, FFS services, insurances) have the greatest chances for development?

The observed rapid growth of the private healthcare market will continue in the coming years. We are talking here mainly about basic health care and specialist outpatient care, because they dominate private expenditure compared to hospital procedures. According to experts, this market has so far been growing at a rate of about 6% per year. In the following years the growth may even accelerate.

The market of subscription services seems quite saturated and is characterized by the domination of a few of the strongest players. Nevertheless, PMR experts expect it to grow at a rate of 8-10% per year. The segment of paid procedures (FFS) will grow slightly slower, i.e. at a rate of about 6%. The health insurance market seems to have the greatest growth opportunities. This type of product offers several advantages and the market value itself starts from a low base.

What changes have you noticed in the private healthcare market recently? What impact has the COVID-19 pandemic had on these changes?

I have already mentioned several of them. This is, for example, a change in the functioning of consulting. The situation forced patients to use telemedicine, which sooner or later would become commonplace anyway. Thanks to this acceleration, private chains can reduce operating costs without having to handle physical visits of patients to clinics.

However, there is also a decrease in the number of procedures performed, especially planned ones. This may result in increased demand for services after a period of the most intense pandemic, when restrictions will be relaxed and patients will be less afraid of infection in the healthcare facility.

There is also a noticeable increase in demand for private laboratory and diagnostic tests, and in the future also for vaccinations. Probably not only against coronavirus.

The private healthcare sector, as well as the public sector, also had to adapt its infrastructure to the challenges of the COVID-19 pandemic. Additional protective procedures and sanitary measures were introduced. Sufficient availability of personnel was ensured and the necessary medical equipment was invested, not just disposable equipment.

Are you planning to expand your Scanmed brand?

Yes, absolutely. We will develop our key specialties and treatment facilities. We want to broaden the scope of medical care. We plan investments in equipment and technologies. Some of our existing facilities may be expanded or moved to other locations. We also do not exclude opening several specialist clinics in completely new locations. Our goal is to increase the scale of the Scanmed network of medical facilities and expand the range of comprehensive health care offered.

What direction does Scanmed intend to develop?

Our priority is the highest quality of service and care for the patient’s welfare. We want to strengthen Scanmed’s position in this dimension, both through additional investments and continuous improvement of current medical procedures.

PMR’s questions were answered by:

Wojciech LukawskiPartner, Abris Capital Partners and Sylwester UrbanekInvestment Director, Abris Capital Partners

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *