In spite of apparent hesitation by the Gordon Brown government in pushing ahead with Blair's healthcare reforms, a recent secondary buyout deal highlights investor expectations of continued private sector involvement in UK healthcare provision.
Last week Bridgepoint announced the sale of Alliance Medical to Dubai International Capital (DIC) for a whopping £600m. This crowns a very sucessful stewardship of the company by Bridgepoint, who bought the business for £86m in 2001 and led it through 16 acquisitions to build one of the largest diagnostic scanning services providers in Europe. Today Alliance Medical runs 190 fixed and mobile scanners (MRI, CT, x-ray) for private clinics and public healthcare systems, benefiting from the increasing trend by hospitals to outsource imaging diagnostics.
The price paid by DIC represents 4.6 x 2006 revenues (£132m) or 16 x 2006 EBITDA (£37m), which is fairly rich for a business that is heavily exposed to the political flip-flops on reform that buffet the NHS on a regular basis. DIC is clearly making a bet that the requirement by Western countries to improve diagnostic services and reduce patient waiting times will force them to involve the private sector in one guise or another.
DIC is a new-ish guy on the block in the UK. It is not technically a sovereign wealth fund like the China fund that recently took a stake in Blackstone, or the better known ones like Singapore's GIC or the Kuwait Investment Authority. The DIC fund runs the personal wealth of Dubai's ruling emirs. It has been active in the UK in the past 2 years and today owns Tussauds attractions group, Doncasters defence engineering group and the Travelodge hotels operator.
Whether there is any strategic interest by DIC to expand Alliance's services into the Gulf region remains to be seen. But as a financial investment this deal rides continuing consolidation among pan-European providers of diagnostic and other healthcare services. With or without the explicit consent of their health ministers, European hospitals are clearly finding ways to exploit private-sector solutions to their woes.