Updates
aug19

Update 19 August 2020

Here in the Netherlands we have had a record-breaking heat wave with eight days of day-time temperatures higher than 30 degrees. However, the hot weather has not stopped activities in the Dutch healthcare sector: For this update we cover:

  • Acquisition of dentist chain is a “fiasco”. Will this put a damper of further consolidation in the sector?
  • Bergman Clinics sales process starting up again. Who will be the buyer?
  • M&A activity in Dutch healthcare sector picking up. Is this the start of a new trend?

Dentistry chain Curaeos in financial problems

Curaeos is a European dental chain with 265 clinics across Europe (the Netherlands, Belgium, Denmark, Germany, Italy). Curaeos is own by EQT (private equity) and PGGM (a Dutch pension company) after an acquisition from Bencis in 2017. Curaeos is market leader in the Netherlands with chains such as DentConnect and Samenwerkende Tandartsen and a number of clinics operating under individual names.

According to “insiders” EQT and PGGM have paid too much for Curaeos in 2017 (€750 million). The valuation in 2017 was based on a continuation of ongoing profitability, increases in revenues from key clinics and ongoing cost savings. Instead, it has turned out that financial results were inflated, integration costs for new clinics were higher than expected, cost savings were difficult to achieve, and revenues in some key clinics declined. The owners have now written off a large part of their initial investments and have made a deal with lenders where debts have been reduced by €150 million (in exchange for equity). EQT and PGGM have paid in an additional €50 million in equity to remain majority owners.

The management of Curaeos is confident that the basic trends driving consolidation in the dentistry sector are still valid and plan to continue their strategy of buying independent clinics and small chains. It will be interesting to see whether this slows down further consolidation in the Dutch dentistry sector. It will almost certainly influence the prices paid for clinics as assumptions about potential economies of scale will  be scaled back.

Bergman Clinics sales process is starting up again

In Q1 Bergman Clinics were poised to be sold. A teaser document had been sent out to a wide range of potential buyers and interest was high. Unfortunately the corona-crisis forced Bergman to close its clinics and all potential buyers also scaled back their activities as the world focused on the short-term consequences of corona and worried about its long-term consequences on the health of the economy in general and the healthcare sector specifically.

Latest numbers show that the Dutch economy has fared better than many other countries with a GDP decline of “only” 8.5%, with a year-on-year expected decline of around 5%. In addition, the Dutch government and health insurance companies quickly set up a program to compensate healthcare providers for losses related to corona. This means that the Dutch healthcare sector is an attractive market for investors looking for potential targets.

Bergman appears to be back in business with all clinics open. In addition, they have just announced the acquisition of Van Linschoten Specialisten who claim to be the market leader in the ENT (ear, nose, throat) sector. This entails an expansion of the activities of Bergman into a new area. In addition, rumors on the street are that the sales process is starting up again. It will be interesting to see if the interest from potential buyers is as high (or higher) as in Q1.

More M&A activities in the Dutch market

As mentioned above the Dutch healthcare sector is currently probably quite attractive for potential buyers. It also appears that several current owners also think that this is a good time to sell. Rumors on the street say that a chain of mental health clinics is being shopped around to potential buyers, and that a clinic specializing in eating disorders is also in the process of being sold. It will be interesting to see how these sales processes develop and whether other owners will use the opportunity to sell their businesses.