Digital transformation of the NHS and social care sector is driving significant levels of M&A and private equity activity.
View our report below which highlights the key areas of focus for investors and acquirers, as well as summarising the notable recent transactions.
Drivers of M&A in the healthcare software and IT market
The NHS is experiencing a surge in demand for its services, driven by a growing and ageing populating, with an increasing prevalence of complex conditions
Combined with a severe staffing shortage and ever present funding pressures, healthcare services across the NHS are stretched, from primary care to emergency services and secondary care
Healthcare software and broader digitalisation offer the potential to play a key role in the battle to meet this heightened demand for healthcare services
The Covid pandemic fast-tracked the use of innovative digital technologies through necessity and this has resulted in greater recognition of the role they can play in addressing the issues faced by the UK healthcare system
The digital transformation is being supported by £938m in investment through the Unified Tech Fund for the financial year 2021/22, with £2bn of funding announced in June 2022 as part of the Digital Health & Care Plan
This accelerated deployment of digital technologies has sparked significant M&A and private equity across the sector, which looks set to continue
Digitising patient records and data insights
At present, only 20% of NHS organisations are digitally mature, with c.86% having some form of Electronic Patient Records (EPR) in place
The government has therefore set a goal for Integrated Care Systems and their constituent organisations to obtain all attributes of digital maturity, including electronic records and other critical systems, by March 2025
This includes investment into a broader range of integrated digital capabilities such as Patient Administration Systems (PAS), medication management and resource optimisation tools
As a result, acquirers have been targeting businesses offering software to support these digitalisation efforts, in addition to providers of data insights across the health system
In parallel, providers of broader digital transformation consulting services have been sought after by private equity, with Palatine investing in Redmoor Health and Westbridge backing the MBO of Channel 3 Consulting
This area of the market will continue to see M&A activity as the drive for digitalisation accelerates
Streamlining clinical pathways
Exacerbated by Covid, NHS England waiting list for elective procedures reached a record 7 million in August 2022, highlighting the urgent need for measures to be taken to tackle the growing backlogs
With £250m of technology funding allocated through the Elective Recovery Technology Fund and a further £248m for Diagnostics, it is clear that digital technology is viewed as a key tool in resolving capacity issues
As a priority area for future NHS spending, investors and acquirers have increasingly focused on targets with specialist software and technology offerings which help to streamline clinical pathways and create efficiencies in the system
This has covered a range of areas such as referral management, digital triage, remote pre-assessment and rehab, and patient flow solutions
Alongside this, the movement towards community-based diagnostic services has led to various deals across imaging sharing and other digital solutions allowing efficient diagnostic reporting, whether on site or remotely
Transforming social care
With only 45% of social care providers having any form of digital care record, addressing this has become a key priority across the UK system
The government have set a goal of achieving 80% coverage for CQC-registered providers by March 2024, allowing carers to spend less time on administrative tasks and more time on patient care
This has led to two high profile private equity investments in 2022, with August Equity investing in OneTouch and Livingbridge backing the MBO of Nourish Care Systems
We expect to see further deals in this area, as technology providers look to “land grab” in a rapidly evolving market with significant opportunities
A number of transactions have also taken place in areas such as remote monitoring and telecare software, primarily aimed at the domiciliary care market, in order to improve care for individuals within their own homes
This movement towards proactive care in order to keep the elderly and vulnerable community out of hospital, will continue to drive M&A activity in the coming months