What does the future hold for social care mergers and acquisitions in 2025?

the healthcare market more widely

The disappointing 2024 environment led to phantom processes according to Paul Tomasic, head of European healthcare at Houlihan Lokey. He explains: “Over the last 18 months we’ve had a period of ‘non-process’ processes. People have been putting out assets with soft bid deadlines, and essentially saying that they were ready to sell but not putting much time pressure on the prospective buyers.

“I think they did that because they didn’t want to have the stigma of a failed process, which is obviously more likely in a quiet market. So, the logic was to give the buyer a large amount of flexibility. I don’t think that worked out however – the buyers were never comfortable without deadlines and momentum in place.

“More recently however we are seeing true preparation with early drafting of IMs, financial and commercial due diligence, etc. I think everyone is still waiting to see how the market will play out, so I’m not expecting a huge flurry of activity, but there’s an intentionality in how sellers are approaching it this year.”

Macheng adds: “Healthcare M&A has had a challenging couple of years for much the same reasons as every other sector. There was Brexit, Covid, high interest rates, and geopolitical uncertainty. But I think having the election relatively early in 2024 has given us the opportunity to appear more stable – and this is important because uncertainty kills M&A activity.

“Of course, there are still challenges going into 2025. There is still a lot of talk around profitability, which is going to have an impact on business valuations. But I think there is a lot more confidence in the market, and there are a lot of funds who have held on for longer than they initially wanted to who are now looking to sell, and also funds who need to deploy capital.”

However Caring Times also understands there is still an aversion to risk in the market with the Bank of England base rate sitting at 4.75%. One source says: “Debt definitely isn’t free anymore, which means it has to be paid back more quickly and people in the market are basically thinking “okay, can we achieve our growth plans in four to five years with the current environment?”. Nobody really wants to wait seven years.”