Update 17 August 2022

Update 17 August 2022

Many of you are now probably back from your well-deserved vacations. I hope that you have enjoyed your time away from the office. Here in the Netherlands many people are still on vacation, but there is still news to report. In this update we cover:

  • Avinty sold to Main Capital. Will there be further consolidation in the Dutch healthcare IT-sector?
  • Private equity focuses on veterinary services. Will the sector face the same process as the dental care sector?
  • Employees on sick leave a growing problem in the Dutch healthcare sector. How can this be turned around?
  • In our snapshot we give an overview of Arene, a provider of digital general practitioner services

Avinty sold to Main Capital

Avinty is a collection of software companies providing B2B IT solutions to Dutch healthcare providers. The IT-solutions provided by Avinty are focused on electronic health records, patient engagement solutions, mobility solutions for patients, etc. The clients of Avinty are mental healthcare providers, revalidation providers, youth care providers and disabled care operators. Avinty has revenues of approximately €30 million and 235 employees in four offices. Avinty was sold to Main Capital by Gilde Equity Management. Gilde has built the company through several acquisitions of smaller IT companies and has prepared the company for sale by strengthened the group management.

Main Capital is an investment firm specializing in enterprise software companies in the Benelux, DACH and the Nordics. Main Capital has made a range of investments in the healthcare IT-sector and currently owns several companies in the Netherlands including CPM4Care, SDB Group, Ennovation and Boomerweb (add-on to Ennovation).

The Dutch healthcare IT-sector is characterized by a few large companies (Nedap and Chipsoft) and very many small companies offering specific IT-solutions. Government interest in the sector is growing (see update of 5 July 2022) as IT and digitalization  is seen as a key driver of improved quality and increased efficiency / lower costs. More M&A activity is sure to come as scale and available capital will be a key to success.

Ongoing consolidation in the veterinary care sector

In a recent article, the Financiele Dagblad (the Dutch equivalent of the Financial Times) has written about the Dutch veterinary care sector. The article claims that the Dutch market for veterinary care is approximately €2 billion and that it is served by approximately 1.300 practices. Two thirds of these practices are independent clinics with chains controlling the rest of the market. Market share in revenues for the chains is higher as their locations tend to be larger. The two largest chains are both Swedish and are PE-owned (Evidensa with three hundred locations in the Netherlands and AniCura with one hundred locations the Netherlands). Smaller chains in the Netherlands include CVS (25 locations) and local players such as DGN and DierenDoctors (franchise).

The story behind the ongoing consolidation in the sector is similar to what we have seen in the dental care sector. The owner of an individual practice finds it difficult to find a successor as most new vets are females who want to work part-time. Selling the practice results in an interesting pay-day (multiples paid are up to ten), and the previous owner can typically stay on as a salaried employee focusing only on animal-facing activities.

Acquiring new locations is attractive for the chains as increasing scale gives advantages in purchasing and back-office activities. Typically, there are also attractive opportunities to increase revenues (combination of more volume and higher tariffs) and improve efficiency in acquired practices that often have not been managed commercially.

It can be expected that consolidation in the veterinary service sector will continue (as in the dental care sector). However, the dental care sector also provides examples of the perils of rapid growth and paying too high a price for acquisitions (see update 19 August 2020).

Employees on sick leave a growing problem for the Dutch healthcare sector

The average percentage of employees on sick leave in the Netherlands is 5.5%. In the healthcare sector the sick-leave percentage is currently 7.8% (up from 7.0% one year ago). Based on the total number of employees in the sector (960.000) this translates into 75.000 healthcare employees on sick leave each day. A specific problem for the sector is the growth in long-term sick-leave (more than 92 days). This has been growing structurally since 2019 across all segments of the sector.

Staffing is already the main challenge facing the Dutch healthcare sector and the issue will only grow as the working population declines in the coming years. Healthcare companies will need to deal with this issue through a combination of technology to improve the use of available staff and new management processes to improve the overall attractiveness of working in the sector.

Snapshot of a Dutch healthcare operator – Arene

The activities leading up to Arene were started in 2016 by three GPs sharing a practice who wanted to develop an alternative to a physical visit to their location. They believed  that this would decrease their workload and provide the patient with better care. They were successful, and in 2020 decided to develop the concept as a more general service. Arene is positioned as an online GP-practice with a focus on patients without access to a physical GP. Typical patients are work-migrants, and Arene currently provided GP-services to refugees from Ukraine.

Arene has recently hired a heavy-weight CEO with previous experience as the CEO of one of the major Dutch healthcare insurance companies. Based on this, the company plans to grow rapidly. Arene currently only provides services in a limited geographical area as they are dependent on agreements with local GPs to manage the 30-40% of patient interactions that cannot be managed digitally. Arene is positioning itself differently than Quin. It will be interesting to see which company will be more successful.