About a month and a half ago, I was in Istanbul attending a global private health conference hosted by the International Finance Corporation (IFC) and John Hopkins Medicine International. The event brought together global leaders in the private health industry to have share ideas, knowledge and lessons in the industry. Participants were mainly senior management/CEOs across the health value chain from health service providers to pharmaceutical & medical technology manufacturers to investors in emerging markets. On top of the conference, my team organized a separate panel session for health providers in sub-Saharan Africa.
I just wanted to share some of my notes and key takeaways from the conference as I was really struck by the discussions of the world’s leading health providers and how it feeds into my work as an investor in emerging markets. Essentially, how I should be looking at the overall market and types of deals I should be focusing on. There were two presentations in particular that I would highly recommend going through, which is Credit Suisse’s Capital Markets Perspective on the healthcare services sector and IFC’s lessons from investing in hospitals.
- Health is a major driver of GDP growth in OECD countries averaging approximately 7.3% as a percentage of total GDP.
- There is an upward trend of life science tools and medical equipment providers in terms of performance
- When comparing trading valuations (EV/EBITDA), EMEA and RoW companies significantly outperform American companies in terms of revenue growth, particularly in Acute Care provision
- Banks are shrinking their lending portfolios particularly in SSA
- M&A activity will continue to increase in a fragmented market with private equity playing an important role in sector consolidation
- Healthcare services are trending from inpatient to outpatient, invasive to non-invasive, and from treatment to prevention
- The global financial crisis slowed growth rates of companies in IFC’s portfolio, but none experienced a drop in sales — indicating that hospital businesses are resilient but not immune to the global financial crisis
- IFC’s revenue projections were reasonably close to actual, on average erring 5% lower than actual (which is impressive!)
- The health market in SSA is an SME market, hence a need for smaller deal sizes, or a consolidation of deals for increased access to financing
Overall, the conference left me feeling uplifted, but also a great sense of urgency in terms of the work that I am trying to do. The conference was IFC’s 5th annual healthcare conference and am already looking forward to the next one.