Spain is an attractive market to midmarket European private equity funds investing in healthcare, and increasing PE activity is demonstrating that appeal. Max Taylor, Associate at Mansfield Advisors, and Pauline Fontaine, Senior Engagement Manager at Antares Consulting, take a closer look at Spanish PE deals and the firms in which they invest.
Spain has attractive market dynamics for midmarket European private equity funds investing in healthcare. There are two key drivers behind this. Firstly, Spain is experiencing the same attractive demographic trends as in other European markets, such as an ageing population and increasing willingness to pay out-of-pocket. Secondly, Spain also has a significant amount of private healthcare providers that operate in a highly fragmented market.
According to Mergermarket data, PE healthcare deal volume in Spain (buyout and growth) reached a 35% CAGR growth between 2014 and 2022. Much of this has been driven by transactions in fertility, veterinary, and private hospitals, as well as other consumer-focussed healthcare, such as dentistry.
Even against macroeconomic headwinds seen across Europe, Spain has had a strong start to 2024 for private equity healthcare deals. In fact, as of 1st July 2024, Spain may be on-track for a record-breaking year for healthcare deals, if not a close second (see exhibit 1). As headwinds ease for PE funds sat on billions in dry powder, and with plenty of assets waiting in the wings to transact, the second half of 2024 could well be even busier in Spanish healthcare investing.
Exhibit 1: Spanish Healthcare Private Equity Deal Volume
1. Market growth and key players
Between 2014-15, a raft of international private equity funds set up offices in Madrid, including EQT, PAI Partners, KKR, CVC and Cinven. They joined the international funds that had long had ground presence in Spain, such as Advent International (since 2002) and ICG (since 2003). Additionally, other international funds that invest in healthcare remain active in Spain without having a local office there, such as BC Partners and ArchiMed, which hasn’t inhibited them from still being among the most active funds in Spain.
Nevertheless, a key feature of the healthcare private equity landscape in Spain is the prominence and impact of local private equity funds, which include but is not limited to:
Magnum Capital Partners
Magnum is the most proliferate PE investor in Spanish healthcare (see exhibit 2). Magnum has a clearly defined investment strategy – to roll-up smaller specialty clinics and sell a combined chain onto larger players. For example, Magnum formed Clinicas Miranza by combining five ophthalmology centres, which it eventually sold to Veonet (PAI and Ontario Teachers’) for €250m in 2022. Magnum also rolled up Ita, Spain’s leading mental health treatment provider, before selling onto Clariane (then Korian) in 2021.
Portobello Capital Management
Portobello has €2.5bn AUM and can be credited for the transformational growth of Vitalia Care Homes (majority stake sold to CVC in 2017) and Vivanta Dental (now with 300+ clinics nationwide). Portobello invests between €10m and €100m for majority and minority stakes.
Miura Partners
Miura Partners has €1.5bn AUM and is based in Barcelona. Miura completed one of the largest deals of the year so far in Spain with its sale of Terrats Medical, a dental prosthetics provider, to Avista Capital Partners. It also recently closed a continuation fund to re-invest in Proclinic, a Spanish dental distributor.
Alantra Private Equity
Alantra’s private equity division is headquartered in Madrid to invest in Spanish business with the ambition to take them pan-European. Alantra currently holds Health in Code, the leading genetic testing platform in Spain.
Recent deal highlights in Spain
In the face of challenging market headwinds through 2023-4, healthcare PE deal volume declined in 2023 from a 2022 peak. Nevertheless, volume continues to be higher than pre-pandemic levels, demonstrating an overall upward trend (See Figure 2); 2023 delivered the second-highest volume of healthcare deals in recent years.
Some of the larger deals in recent years have included:
IVIRMA and Clínica Eugin
Spain is a world-leading provider of fertility treatment, boasting the largest market in Europe and providing services both to Spaniards and to thousands of medical tourists that travel specifically to Spain for their high quality treatment offering. Unsurprisingly then, the largest healthcare PE deals in Spain in the last few years have been in fertility, where In 2022, KKR invested in IVI-RMA, the largest IVF chain in the world, in a deal worth ~€3bn. In 2023, KKR also acquired the US operations of Spanish-based competitor, Clínica Eugin, and GED Capital acquired the European operations, both from Fresenius.
Hestia Alliance
Waterland-owned MEDIAN, the German rehabilitation services provider, acquired Hestia Alliance in September 2023. Hestia operates over 2,000 beds in 14 mental health facilities across Spain.
Palex
Palex is a medical distribution business with deep historical roots in Spain (the name is a portmanteau of its original market offering: potatoes-lettuce-exports). In 2023, Fremman co-invested in Palex with Apax; together they have since invested in sizable add-ons such as DuoMed and InnovaMedica to form an even stronger pan-European presence.
Nevertheless, it hasn’t all been smooth sailing in Spain – in the last twelve months, two highly-anticipated deals did not complete.
Unavets
Unavets (€15m EBITDA) is a fast-growing veterinary clinic chain in Spain put up for sale by sponsor Oaktree earlier this year with Jefferies. While it was reported that Unavets attracted offers from PAI, Ares, and L Catterton, the process fell over due to differing price expectations.
Corus Labs
Additionally, Careventures, a Belgian-Spanish investor, had hoped to sell Corus Dental, the Spanish dental labs business, starting a process at the end of 2023. While Bridgepoint advanced through the process, the deal was contingent on the completion of an acquisition in the US, which later fell over, so Bridgepoint subsequently got cold feet.
High potential opportunities
Nonetheless, Spain remains an attractive market for healthcare PE due to its ageing population, consumer-leaning attitudes towards healthcare, and low consolidation rate in specialty sites. Consequently, one of the key drivers of increased PE activity in Spanish healthcare is the significant roll-up potential, specifically in healthcare services.
Veterinary
In the last ten years, the UK veterinary market has consolidated, fronted by market leaders Medivet, VetPartners, and Vets4Pets. When CVC acquired Medivet in 2021, it did so with an eye for replicating the consolidation story in other key European geographies, one of which was Spain. This was because the Spanish market remained immature, but still exhibited close cultural proximity in the form of pet humanisation and premiumisation trends that had so enriched the UK and US veterinary markets. Just like with Spanish dentists and pharmacies, these high street healthcare clinics are still often small one-man bands in Spain, with many looking to sell out and retire in the coming years, making it an attractive time to come and consolidate the market. There are also synergies to be made by building these pan-European groups, such as drug synergies.
It is no surprise, then, that these groups have expanded into Spain at speed, with CVC-owned Medivet acquiring ~50 clinics and BC Partners-owned VetPartners acquiring ~77 clinics in just over three years.
Social Care
Clariane (formerly Korian) entered the Spanish mental health market by acquiring Ita from Magnum. Ita has been growing successfully, and now private equity players have the opportunity to join the race in the form of Mentalia Salud. Mentalia Salud is a ~€7m EBITDA chain of mental health clinics, currently being divested from DomusVi. As of July 2024, Abac Capital and Peninsula Capital were both through the first-round bids.
Analysis by Antares Consulting demonstrates that Spain has less than half the amount of required mental healthcare beds. This significant deficit presents an opportunity for a PE investor to transform the private sector provision to meet significant national demand.
Additionally, in elderly care, there is a well-known stat among investors that Spain has the highest life expectancy at birth in the EU (at 84.0, it is a full four years longer than that of the UK), which means an ageing population are increasing demand for a longer average length of stay.
Ones to watch
Some of the largest PE-owned healthcare assets in Spain are reported to be coming up for sale in the near-term. We believe there are particularly attractive opportunities in:
Health in Code
Health in Code is the Spanish genetic testing business owned by Alantra Private Equity.
Donte Group
Donte Group, formerly known as Vitaldent, is the Advent International-owned chain of 400+ dental clinics across Spain. For investors, Spain has attractive market dynamics for dental care – there is next-to-no public provision, double the amount of dentistry clinics to the UK (despite a population that is ~30% smaller), and an increasing uptake in cosmetic dentistry. It has been reported that Advent will begin its exit process in the coming months.
Suanfarma
Suanfarma is the Archimed-backed CDMO(?), expanded through recent acquisitions in Spain of Monteloeder, and previously owned by ICG. Suanfarma x y z
Quironsalud
An internationally recognised brand, Quironsalud is the leading private healthcare group in Spain, with 57 hospitals, 130 medical centres and a 2023 revenue of X. Part of Fresenius Group, it has long been rumoured that Quironsalud would be part of Fresenius’ slimdown – in early 2023, local Spanish press reported that Quiron was being encircled by interested PE funds, with valuations as high as €7bn. As of July 2024, there is no sale process yet.
ROVI CDMO
At the time of writing in July 2024, the CDMO division of Laboratorios Farmaceuticos Rovi appears to be the next major asset to transact in Spain. Lazard has the mandate to sell the Rovi CDMO, which in its own right generates ~€260m+ in EBITDA. it has been reported that Cinven, CVC, KKR, Permira, and Antin have all gone into the second round. Notably, the completion of an asset of this scale in these recovering economic times would be a significant vote of confidence in the Spanish market.
- Conclusions and forward view
Spanish healthcare is a market ripe for consolidation by midmarket private equity funds – the national macro-trends are favourable and the breadth and depth of opportunity is appealing. In particular, consumer healthcare, including dental, IVF, and veterinary, are particularly attractive. Moreover, although Spain does not have an overly large pharma industry, the broader European PE trend to invest in pharma and life sciences is unveiling opportunities in Spain, evidenced by ROVI Pharma, Suanfarma, and Health in Code.
