Boomers drive merger activity

Ageing wealthy boomers, staffing shortages and regulatory reform in the health care sector is driving a boom in mergers and acquisitions as private equity groups and industry players look to gain a greater share of the pie.

Dealmakers are seeing a strong pick-up in activity within the health care sector after a quiet period in 2023 with plans by Paragon Care to merge with CH2 and Genesis Capital’s increased $279m bid for Pacific Smiles among the deals put together in recent weeks.

Further activity is expected given high levels of dry powder kept in the cupboard for the past year as a result of aggressive interest rate rises, inflationary pressures and subsequent economic slowdown.

McGrathNicol partner Selina Gerner told The Australian that pent-up demand has started to see a pick-up in activity with 50 per cent of the private equity market now looking for opportunities in the health or health technology sectors because of macroeconomic trends including an ageing wealthy population.

One digital health platform, Ms Gerner said, had been receiving two to three offers a week from private equity groups, demonstrating interest in the sector.

“Our next generation of older Australians are the oldest, wealthiest and largest population we’ve ever seen, and within the coming decades Australians that’ll be over the age of 65 will be more than 20 per cent of the population,” she said.

“This population is quite used to spending money for services and that is different from some of the older ageing populations that we’ve seen in the past. Now we have people who are quite willing to and want to pay for the aged care services that they want to receive.”

Ms Gerner said the level of wealth helped to make the sector attractive because it would underpin growth within the sector, which is important for investors.

Much of the interest is coming from large hospital groups who have an aggressive growth mandate.