Sector nearing ‘largest period of consolidation’ in history

The level of mergers and acquisitions in the aged care sector is returning to 2015 peak levels, according to industry analysis.

The number of mergers and acquisitions in the aged care sector over the last two years shows a steady return to 2015 peak levels and marks the early stage of a larger consolidation process “that will reshape the sector”, according to a new industry report.

The report – Deal Tracker – is an initiative of aged care consultants Ansell Strategic that lists the latest merger and acquisition activity among aged care and retirement living organisations and highlights the trends, risks and opportunities.

That list includes 35 transactions for this financial year including the recent acquisition of Signature Care For Purpose Aged Care Australia, Opal Healthcare’s acquisition of BlueCross, Australian Unity’s acquisition of MyHomecare and multiple deals involving Respect and ApolloCare.

Source: Ansell Strategic’s Deal Tracker

The report – which also looks at the drivers of market activity – finds large providers continue to consolidate and expand their scale and capability while smaller groups are mitigating their exposure to residential aged care uncertainty through diversification.

Ansell Strategic managing director Cam Ansell said the fortunes of the aged care sector changed around funding models, policy and changing consumers in a process that normally resulted in investment cycles between peaks and troughs of around seven to 10 years.

Cam Ansell

“We are at the end of a particular deep trough following the 2016 budget cuts, Covid, royal commission and accelerated reform – the level of interest from local and overseas investors is growing rapidly,” Mr Ansell told Australian Ageing Agenda.

“The third investment wave is well and truly underway, and it will accelerate quickly from here to be the largest period of consolidation in this country’s history.”

Before embarking on a growth or divestment program, providers should consider their vision for the future and where they want to be in it, said Mr Ansell – who co-authored the report.

“The next decade will reshape the aged care landscape and we expect that services will look very different to today – new growth will be in assisted living and the role of residential aged care and villages will be different and ownership will be more consolidated,” he said.

Mr Ansell’s tips for buyers include caution in the drive for scale. “Often the magic numbers quoted for minimum scale are uninformed.”

For sellers, he suggested giving the highest priority to confidentiality and buyer selection. “By managing the process within a tight timeframe and engaging only with credible, discreet buyers, the transaction can be completed with minimal disruption to key stakeholders [residents, families and staff] or erosion of goodwill. 

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Tags: Ansell Strategic, cam-ansell, Deal Tracker, mergers-and-acquisitions,

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