Health & Ageing sector - increasing investment opportunities 

March, 2016 - Shane Evans Ben Liu

Increased deal activity is likely in Australia's health and aged care sector in 2016, driven by:

• investment interest from China

• Australian players targeting outbound opportunities through joint ventures and partnerships; and

• consolidation in the aged and home care services areas.

Rapidly ageing populations across our region are driving demand for high quality health care, especially in countries such as China and Japan. Australia is recognized as a regional leader in health and medical care and Asian investors are particularly interested in our sector-related assets – there are a lot of good opportunities and they allow transfer of learning back to Asia. That’s why we'll see heightened M&A activity in the sector this year.

There also will be significant opportunities in 2016 for Australian health and aged care businesses to take world-class Australian health industry expertise, R&D knowledge and capability across to China and the Asian region more broadly.

The signing of the China-Australia Free Trade Agreement and China's recent encouragement of foreign investment in its health care industry, especially in for-profit aged care, presents enormous opportunities for Australian health and aged care sector players.

One example is the Chinese Government's decision to 'privatise' 7,500 public hospitals over the next decade. This creates a significant business opportunity for Australian private hospital operators, particularly through partnerships with local Chinese investors.

ChAFTA allows Australian qualified service providers to wholly acquire and manage hospitals in three municipalities (Beijing, Tianjian and Shanghai) and four provinces (Guangdong, Jiangsu, Fujian, Hainan).

ChAFTA also permits Australian service suppliers to establish profit-making aged care institutions throughout China.

That said, we believe there will also be significant legal issues to consider for foreign investors thinking of entering China's aged care industry. These issues range from regulatory approvals from central and provincial authorities, to understanding the land use rights granted to foreign investors, to medical institution practicing licences required where in-house medical care is to be provided, to the need for certain capital requirements.

Top 3 Issues/Opportunities for 2016

Aged care – a red-hot area, with China's ageing population driving both inbound investment into Australia and outbound investment into China by Australian players

Hospitals – acquisitions a likely stepping stone to take knowledge back to China or to JV into China. 
Our ageing demographic is increasing demand in the areas of cardiology, cancer care, ophthalmology and other medical/health-related areas.

Home care – a perfect storm of circumstances will make this 'the next big thing', With a predicted 90% of Australians wanting to remain in their own home as they age, a key policy objective of the Commonwealth is to facilitate choice and place more control for decision making in the hands of the consumer.

Recent deals in health and ageing sector

• Aveo takes over Freedom in $215.5 million retirement village deal

• Jangho Group completes takeover of Vision Eye Institute

• Sale of Masonic Homes in South Australia completed

• Australian retirement village operator acquired by NZX / ASX-listed asset manager and NZ sovereign wealth fund



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