In the face of a challenging political and economic landscape marked by funding issues, high cost of capital, rising energy costs and recruitment challenges, the 2023 Alantra Specialist Care Fast 50 unveils a remarkable resilience among the top players in the sector. Caring Times talks to Justin Crowther, managing director and UK head of healthcare, and Matt Kumeta, vice president, to find out more.

The average businesses in this year’s Alantra Specialist Care Fast 50 report has posted a two-year compound annual growth rate (CAGR) of 22%. Most businesses in the report have posted double-digit growth, while on average the top 10 have all delivered annualised revenue growth of more than 30%.

Kumeta says: “Following several years of market consolidation, this edition of the report features more business’ north of the £100 million revenue mark than ever before. Inevitably, as these operators scale through organic initiatives and M&A, it becomes harder to maintain strong and sustainable growth rates. The fact that the average growth rate in this year’s report is approximately 22% is quite remarkable – this compares favourably to the last edition (24%) especially when set against the backdrop of a lower volume M&A environment. The market remains highly fragmented and there are still significant growth opportunities for innovative platforms in this space.”

The fastest-growing business, Equilibrium Healthcare, has achieved a two-year CAGR of 55%. The report ranks Liaise Group Learning Disabilities second with a growth rate of 47%. And those following are M&D Care (43%), The Esland Group (43%), ivolve Care & Support (41%), Aspirations Care (41%), Towerview Care Advanced Neurobehavioural (39%), Steps Rehabilitation (38%), Flexible Support Options (36%) and Active Care Group (32%).

M&A volumes

The pace of M&A activity in the specialist care sector may have slowed in recent months, but there is every prospect of a renewed acceleration over the coming months and into 2024, the report predicts.

Notable deals in the last two years include the sale of Voyage Care to Wren House Infrastructure, ivolve Group’s acquisition of Cavendish Care and Montreux Capital Management’s acquisition of Zero Three Care through its Fixed Yield Fund. Private equity also remains active in the space – recent examples include Sovereign Capital’s investment in A Wilderness Way, which marked a successful exit for BGF, and QPE’s partnership investment in Blue Ribbon Health and Wellbeing.

Crowther says the specialist care sector continues to grow “strongly” through a combination of organic growth and M&A activity. “This indicates that businesses are actively investing in growth to meet the rising demand. M&A deal volumes in 2023 were lower due to financial market conditions. However, there are still notable consolidating platforms, which are consistently growing. Liaise Group, for example, utilises organic and inorganic growth strategies to consolidate the fragmented landscape.

“The sector appears to remain ripe for further activity in 2024 and 2025, ” he adds.

As a result of consolidation, the specialist care sector now features more larger businesses than in the past: there are now five firms with annual revenues of more than £100 million, up from two in Alantra’s last research.

By revenue, the ten largest providers of specialist care services account for just 15% of the market, leaving plenty of room for further deal-making, particularly as well-run, efficient providers can secure stable margins.

The report also includes data from strategy consultancy Connell Consulting which put the market value of adult specialist care in the UK at £15.3 billion, with learning disabilities accounting for 59% of the market.

Tech & ESG take center stage

From a digital and technological standpoint, Crowther emphasises that businesses in the sector are increasingly looking to deploy technological solutions to improve efficiency, monitor and track outcomes, and generally to manage businesses more effectively. Kumeta adds the Care Quality Commission perspective here, highlighting technology’s “growing importance” on the agenda.

Regarding ESG, a broad range of stakeholders is pushing specialist care operators harder on their ESG performance, and the pressure is only likely to grow, the report highlights. Companies deemed ESG-compliant or forward-thinking can now access lower-cost funding, as highlighted by Crowther.

Overall, the future of adult specialist care involves an anticipated increase in M&A, a call for a more specialised representative body, an emphasis on leveraging digital information, a push for sustainable growth, and a demand for greater certainty regarding funding.

The full report can be accessed here