Decoding Private Equity's Healthcare Questions: The 5 Ps Framework

The UK private healthcare market is an attractive prospect for many private equity firms, but navigating this landscape requires a deep understanding of key metrics and considerations. At Rare, we frequently engage with private equity investors seeking to enter this market either through M&A or by starting new ventures, and we've observed a consistent pattern in their inquiries. 

This has led us to develop the "5 Ps of Private Equity" framework, which we believe offers valuable insights for both investors and healthcare providers, who want to better understand what to look out for.

The 5 Ps of Private Healthcare for Private Equity

1. Place

Location is paramount in private healthcare, particularly in countries like the UK where the delta difference income can be vast within local authorities. From our experience, private equity investors are keen to understand:

• Hotspots: Where are the areas of high demand for private healthcare services?

• Demographics: What are the income levels, age distribution, and other relevant demographic factors in the target area?

• Accessibility: How willing are patients to travel for specific treatments? E.g., Our data reveals that 51% of aesthetics patients are willing to travel over an hour for cosmetic treatment, highlighting the importance of location intelligence.

2. Product

The service offering is a critical component of success. Key questions include:

• Proposition: What unique value does the healthcare provider offer?

• Market Gap: What unmet needs are being addressed, in that area? Who else is in the market?

• Pricing: Is the pricing strategy competitive and sustainable?

• Product Stickiness: What are the patient retention and repeat business rates?

• Occupancy: How well is the facility utilised?

• Asset Optimisation: Are there opportunities to enhance efficiency and revenue generation?

3. Patient

Understanding the patient base is essential for long-term growth. Private equity firms are interested in:

• Customer Lifetime Value: What is the long-term revenue potential of each patient?

• Cross-Sell and Upsell: Are there opportunities to expand service offerings to existing patients?

• Patient Satisfaction: How do patient satisfaction levels compare to competitors?

4. People

The team behind the healthcare provider is a crucial factor. Investors want to know:

• Team Strength: Is there a capable and experienced management team in place? How reliant is the business on the owners?

• Staff Retention: Are employees satisfied and committed to the organisation?

• Customer Relationships: Are relationships built on trust and loyalty?

5. Performance

Financial performance is a key indicator of success. Private equity firms typically analyse:

• EBITDA: Pre-tax earnings are a key measure of profitability.

• Balance Sheet: A strong balance sheet indicates financial health.

• Profitability: Are profit margins healthy and sustainable?

• Retention Mechanisms: Are there strategies in place to retain patients, such as membership schemes?

Rare Monitor's Role

At Rare Monitor, we specialise in providing data-driven insights that address these key questions. We equip private equity investors with the information they need to make informed decisions about potential investments in the UK private healthcare market.

Key Takeaway

For healthcare providers seeking private equity investment, understanding and optimising these 5 Ps can significantly enhance their attractiveness to potential investors. By proactively addressing these key areas, providers can position themselves for success in this competitive landscape.