Which private equity houses face large losses as the healthcare service bubble bursts? Many who bought hospital chains in 2006 and 2007 paid over the odds. The really bad news is the debt multiples racked up on some of these deals. Debt multiples are not often revealed, but we are reliably informed that 3-4 deals were done on debt multiples of 14.5x EBITDA. At a time when normal EBITDA multiples were 8-9x, the opco/propco structure, which treats the underlying property as an asset in its own right, enabled private equity buyers to really gear up in healthcare services.
We don't know which firms really splashed out on these multiples, but we do know which private equity houses invested most in property-backed deals: Apax and Cinven were the two really big purchasers.
Cinven spent over €3billion on buying BUPA's UK hospital chain (now Spire), USP Hospitales in Spain and Classic Hospitals in the UK.
Apax also spent over €3 billion. It shelled out 17bn Skr for its acquisition of Capio in September 2007. We know that Apax paid over 15 times 2005 EBITDA for Capio, although it has managed to claw back quite a bit by selling the labs and the UK operation. Apax also put up almost half the money for the £2.2 billion acquisition by Netcare of the UK hospital chain General Healthcare Group in April 2006.
Others, who could be in a difficult situation, include BC Partners and Axa, who teamed up to buy French chain Medica for €750m in July 2006. Also affected could be IK Investment Partners, who bought Attendo, the big Swedish care home and healthcare chain in January 2007 and who also purchased Medone, the big Finnish recruitment outfit, in June 2007, both for undisclosed, but presumably hefty, prices.
Non-European stock market quoted companies also paid top dollar. Australian group Ramsay bought Capio UK for £193m in September 2007, South Africans Medi-Clinic paid €1.8 billion for Hirslanden in Switzerland in August 2007 and Netcare paid half the £2.2 billion price tag for General Healthcare Group in the UK.
Apax
Cinven
Hospitals
Private equity hospitals
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