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Welcome to this issue of Inform: Healthcare
As the 'credit crunch' marks its first anniversary, the economic outlook remains uncertain. The healthcare sector has suffered like others from the withdrawal of affordable bank finance, waning interest among private equity investors and the resulting decline in valuations, with tales of financing woes at two of the largest operators, Southern Cross and Four Seasons making recent headlines. Meanwhile, operators are grappling with downward pressure on margins, driven by inflation, the increasing cost of borrowing and paltry fee increases (for both private and publicly funded service users). Yet, the healthcare sector is still seen as an attractive proposition by the investment community (no doubt with an eye to the long term fundamentals and new opportunities in areas such as primary care) and some good quality deals are still being done, particularly in the mid-market.
That said, we are likely to see a number of tricky refinancings as businesses struggle with finance covenants and debt facilities priced in sunnier times reach maturity. Highly-leveraged opco/propco structures may also begin to feel the pressure both from diminishing revenues and falling property valuations. And with the banks still licking their wounds and saddled with unsyndicated debt up to a year old, borrowers can expect tea but little sympathy. It may fall to investors to plug any funding gap with further equity injections in the short term.
While attention is rightly focused on the current financial uncertainties, operators should not lose sight of the raft of legal and regulatory reforms which are being rolled out across the healthcare sector and, for the most part, imposing an increasing compliance and cost burden on businesses. In this issue of Inform: Healthcare we take a look at the following recent and forthcoming developments:
Our Healthcare Team has a well-established track record advising clients including care home owners and operators, medical supply businesses, biotechnology university spin-outs and leading charities within the sector. Michael Lingens heads the multi-disciplinary team which includes specialists in corporate finance, banking, tax, property and employment law, advising on corporate and property portfolio acquisitions and disposals, buyouts, debt and equity refinancings and commercial, research and licensing agreements.
If you would like any further information on the issues raised in this newsletter or to discuss how our Healthcare Team could help your business, please contact Michael Lingens or William Nash on 020 7427 6400.
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