Newsletter November 2019

November 2019
for Europe & Germany
Bridgepoint launched sale of global dialysis provider Diaverum
Mid 2019 the British PE Bridgepoint launched the sales process to exit its Swedish portfolio company Diaverum.
The Group, acquired 2007 in a carve-out, is a global leader in dialysis services with presence in Europe, South America, Middle East, Asia and Northern Africa. Back in 2007 Diaverum operated 155 clinics in 14 countries generating EUR 246m in sales and an EBITDA of EUR 48m. Since then Bridgepoint backed the strong expansion of the Company.
Today Diaverum is rumored to be marketed with more than EUR 800m sales and an EBITDA of EUR 190m providing for an expected valuation exceeding EUR 2.0bn.

Schönes Leben Gruppe continues strong growth strategy by acquisition of Mediko

End of October the Waterland-backed Schönes Leben Gruppe announced the acquisition of its peer Mediko. Mediko currently operates 20 facilitites with a capacity of more than 1,800 beds expanding the Schönes Leben network to North-Western Germany. In addition to the transaction the Seller and real-estate developer Lindhorst Gruppe entered into an agreement to develop additional 20 facilities in the upcoming years for Schönes Leben.
I-Squared Capital acquired Domidep

The US-infrastructure fund I-Squared Capital has won the competitive auction process and acquired one of the leading French nursing homes operator Domidep. The transaction is valuing Domidep at more than EUR 1.1bn while the Group is reporting an EBITDA of EUR 70m in 2018. The transaction has been approved by EU merger control in August 2019.
AMEOS clinics with two acquisitions in 2019

PE-backed AMEOS continued to grow by acquisition of tow single facilities to expand its nation-wide network. Following the acquisition of a clinic in Lübeck from its direct competitor Median with 115 beds, AMEOS agreed to acquire the Lippische Nervenklinik (LNK) Spernau in Bad Salzuflen with 111 beds specialized in (geronto-) psychiatry and addictions
Leading Dutch outpatient care operator Actief Zorg acquired insolvent Boeijend Huys

Boeijend Huys is active in elderly and youth care, providing a mixture of outpatient, day and stationary care.
Due to the stationary care offering, this transaction marks a step away from Actief Zorgs current core business of medical homecare. The Dutch Group with more than 4,000 employees cares for more than 15,000 clients daily. This transaction is in line with Actief Zorgs growth strategy of the past, which includes the acquisition of struggling competitors.
Launch of new Pflege-TÜV system for independent assessment of nursing care homes in Germany

As part of a care quality improvement process and the “Pflegepersonal-Stärkungsgesetz (PpSG)” the regulatory authorities agreed in early 2019 to replace the existing system of MDK grades by a new system of “indicator-based quality assessment” – the Pflege-TÜV. This scientific approach links the results of the internal quality management with an external assessment focusing on the evaluation of care results and conditions of the residents rather than assessment of the care service execution and documentation.
The assessments of the Pflege-TÜV start in November 2019 with first results being expected for early 2020.

Advent International acquired a majority stake in Europe’s second largest dental chain Vitaldent

Former owner JB Capital Markets sold most of its stake of the Spanish dental group Vitaldent with 300 operated locations to Advent International, remaining only with a minority stake. In the future, Advent plans to support the management team in the company’s focused buy and build strategy targeting to double the network to 600 locations during the investment period.
noma-med acquired by German medicalized homecare group PubliCare

In June 2019 PubliCare (owned by KMT Medical – US-based homecare group) announced the acquisition of noma-med in order to strengthen its service offering by among others continence, wound care and enteral and parenteral nutrition.
Following the acquisition, the joint group is expected to generate revenues of more than EUR 100m challenging direct competitors such as DFG, Bonitas or opseo.

Following Median, second large PE transaction failed with Nordic Capital pulling the sale of GHD
Appointed advisor Macquarie failed to find a buyer willing to pay EUR 1bn for Nordic Capitals GHD GesundHeits GmbH, the leading German distributor of medical care and rehabilitation products.
Following a second round of the process it is rumored that potential investors backed off due to a high price expectation based on future run-rate EBITDA paired with concerns regarding the business and its sector.
Nordic Capital acquired GHD in 2014 from IK Investment Partners for an estimated price of EUR 500m.
Acquisition of Charleston Group by Italian nursing care operator KOS and Primonial REIM from EQT

The Top-10 stationary care operator Charleston operates 47 care homes with 4,050 beds as well as four daycare and seven outpatient care centers. 
By this acquisition KOS is the second Italian operator entering the German nursing care market following Sereni Orizzonti which acquired two facilities from DPUW earlier this year. This transaction is in line with the interest of foreign strategic investors (i.e. France, Belgium, Italy) to enter and expand in the German stationary care market.
As part of the transaction the respective real estate owned by Charleston was sold separately to the French REIT Primonial REIM.

Source: Company Information, Reuters, mergermarket, ACXIT Capital Research
Current Developments in the German Healthcare Sector
The Future of Elderly Care in Germany
The heat is turning up in the German elderly care market! We have had already three petitions demanding better care provision and a fixed ratio of stationary care places in relation to the number of people in need of care in a specific region. Additionally, changing demands of elderly people combined with the increasing shortage of skilled workers create further challenges for a market which so far has been known for its stability and attractive macro-environment. So, we think it is time to take a fresh look at the market.  
Approx. 3.4 million people are receiving care across Germany today. By 2030, the number of people above the age 65 will increase to about 4 million due to the demographic developments. Traditionally, elderly care is provided in Germany either at home by family members, professional ambulatory care operators or stationery in nursing care facilities. In 2017, around 24.1% of people in need of care lived in the nationwide 14,500 stationary care facilities.
However, petitions for referendums like in Bavaria show only one side of the German care market.
Besides the well-known aging of the population, there are more factors which increasingly affect the market. There is a growing number of affluent midclass citizens, that are willing, and more important, able to pay for premium services. Additionally, there is a general improvement of average health conditions, due to the high medical standard in Germany, which leads to more agile and active elderly who want to live in an environment which allows them to be active and independent as long as possible with the possibility to receive tailored care services as required. Their needs are very different from the standardized care provision approach of established elderly care facilities.
Having said that we were able to identify major trends that will affect the stationary care market and lead to additional different new service offerings and investment possibilities:
  • Customized services. The widening of the social gap will lead to more differentiated care offerings
    Redefinition of services package for social welfare receivers – focus on basic needs only
    – Higher-class services / premium offering – residents and relatives are willing to pay more for the best services available. The lighthouse projects started in Hamburg, Berlin and Munich serving the premium segment, are very successful, hold extremely high occupancy rates and are attracting the younger, more affluent, and less care intensive generation of elderly people. Typically, the inhabitants of premium facilities are demanding 5-star services and are also willing to pay for the services from their own funds.
  • Early customer approach.There is a shift in the approach of elderly people by targeting them before they are in need of care. As elderly become more and more agile and require a lower care support, alternatives to traditional care homes emerge. While in the US retirement communities like in Florida are already very present, they are not expected to appear in Germany. Still, alternatives like assisted living or shared flats / living groups with a more open approach are on the rise. Offerings include more private space (own apartment with own furniture) as well individualized service packages and a number of alternative activities (fitness, travel, culture) which are accessible for the inhabitant if desired. To allow inhabitants to stay until the end of their lives in their apartments, these facilities have the capabilities to provide the necessary care services.
  • Specialized care homes. We also see an increasing demand for more specialized care homes be it for dementia, psychiatric illnesses or any addictions. The number of dementia patients is constantly increasing, representing a major trend which requires special care concepts that also include special training of personnel. In addition, it often leads to specific requirements for buildings (closed wards, specific home structure). Specialized addiction homes allow proper and customized solutions for respective patients.
  • Intensive care – from niche to high growth segment. Increasing cost pressure at hospitals lead to a development of new intensive care models. Intensive stationary care facilities and living groups replace increasingly 1:1 care models.
While demographic growth of the elderly population will fill existing homes and drive demand for new capacity for the foreseeable future, new care models will emerge. In order to satisfy the diverse needs of the “active” elderly population, investments in real estate and different forms of services / operators will be required. Premium services will be inspired by properties in top locations with highest building quality and superior services. Obviously, this creates a lucrative niche for new market players. Dedicated specialized care homes are rare, but needed, thus creating a huge opportunity for real estate investors and operators.
In summary, change in the expanding market for elderly care services is good for our elderly population and investors.
Note: 1) Definition of people in need of care according to Pflegeversicherungsgesetz SGB IX. Data as per 2017 (number in brackets show the change in comparison to 2015).
Source: Statistisches Bundesamt, ACXIT Capital Research
Comparable Company Analysis
Healthcare Indices vs. EURO STOXX 50
Note: 1) IFRS 16 Accounting rule change from 2018 to 2019 effects EBITDA; Indices for Nursing Care (EU) and Acute & Rehabilitation (EU) correspond to the companies listed in the CCA, equally weighted
Source: S&P Capital IQ as per 29.10.2019
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