PH’s P1.5-T healthcare industry is ripe for M&As
The P1.5 trillion (from P1.16 trillion in 2021) Philippine healthcare industry is open to a lot of opportunities for mergers and acquisitions (M&A) as it is presently highly fragmented with multiple brand leaders across various sectors.
In a media roundtable, boutique corporate finance advisory and consulting firm Fortman Cline Capital Markets (FCCM) sees an interplay of consolidation, formation of alliances, and creating integrated ecosystems among industry players.
FCCM was recently named the Best Mergers and Acquisitions (M&A) Advisory Team in Southeast Asia for 2023 by Capital Finance International (CFI). It has also been ranked as one of the top M&A firms in the Philippines by Bloomberg and in Southeast Asia by Thomson Reuters.
In the Philippines, FCCM acted as one of the two financial advisers of Professional Services Inc. (PSI), the company that owns The Medical City (TMC), as it recently sealed the deal with Luxembourg-based CVC Capital Partners.
FCCM also advised Mang Inasal Philippines Inc. on its sale of a 70 percent stake to Jollibee Foods Corporation, and the SM Group’s All First Equity Holdings on its acquisition of a 60 percent equity stake in Philippine Geothermal Production Company, Inc. from Chevron Geothermal Philippines Holdings, LLC (USA).
“The winners will be those that provide the most service-oriented patient experience that delivers optimal health outcomes at the most reasonable or affordable price,” said Fortman Cline Management Services (FCMS) Managing Director Francis Del Val. FCMS is a new unit under Fortman Cline.
He noted that the local healthcare industry is still highly fragmented with multiple brand leaders across various sectors: medical supplies distributors, pharmaceutical firms, hospitals, diagnostic centers, retail pharmacies, retail medical device/equipment suppliers, and health maintenance organizations (HMOs).
“Thus, consolidations and alliances are seen to emerge to allow the industry to become more efficient, respond faster to emerging trends in the healthcare industry as well as to the impact of the Universal Health Care (UHC) which was signed into law in 2019,” Del Val said.
As the consumer-driven Philippine economy grows, a bigger middle class with higher purchasing power and increasingly sophisticated preferences is being created nationwide, particularly in highly urbanized cities.
The affluent down to the growing upper middle class is seen to patronize private healthcare providers while the lower socio-economic class is given greater access to healthcare by the government because of the UHC.
“UHC implementation will increase competition between private and public sector by providing options. As the government increases investments, private hospitals that do not invest, may not be able to keep up,” Del Val said.
He added that, “Competition will continue to increase between the private and public sectors over already scarce human resources. Rising administration costs and competition from the public sector will force smaller hospitals to consolidate with bigger ‘megabrand’ hospitals to survive,” Del Val added.
However, he pointed out that, “While the UHC will provide access to public healthcare facilities, these will be limited by capacity constraints and patient experience.”
“There will be opportunities for the private sector to be seen as the trusted partners of local government units (LGUs) who will primarily be implementing the UHC as they may not always have the expertise nor the trained staff to succeed. Collaboration between private and public sector is key to move the UHC agenda forward,” Del Val said.
Aside from the growing middle class and the impact of the UHC, the local healthcare industry also has the potential to grow further through medical tourism.
“Medical tourism could be a game changer. The Philippines can position itself as the go-to surgical and recovery center for patients with overseas insurance and expensive local medical costs, not to mention long waiting lines in their home countries,” said Del Val.
Proximity and historical-cultural relations are drivers of where medical tourists go, he said noting that, the Philippines has an opportunity to attract medical tourists from higher-income.