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Market Commentary

Healthcare Funding

With yesterday’s cut by the Fed of their Base Rate to 1%, it seems that it cannot be long before the Bank of England committee follow suit and reduce rates more aggressively. Indeed, David Blanchflower of the Monetary Committee was particularly vociferous about this which was picked up in one of this morning’s Telegraph blogs which you can read here.

The impact that this is likely to have on our markets is further waiting – we are already seeing this to a certain extent insofar as there are less buyers around and less deals to be done. Speaking as we do to lots of operators and potential investors, I get the distinct impression that the market is distilling into 2 types of buyers;

The first type are those who are waiting and seeing, who see the falls in prices in the housing market and believe that this will filter through into the price multiples and per bed prices that are being asked by vendors. These buyers are probably waiting for an opportunity to drop in their lap that they just cannot refuse and indeed they may just get lucky with such opportunities.

The second type, certainly from a broker’s perspective are those predatory buyers who are actively looking in the markets right now. I think these buyers smell opportunity in the next 2 or 3-quarters and certainly they have never been inundated with so many emails and flyers of care homes for sale as agents look for buyers. In previous years many of the businesses we are seeing never even made it to the market and there are a few very interesting sales of homes in receivership/under administration.

When you combine the numbers of opportunities that are currently hitting the market, combined with a projected falling UK interest rate environment, some of these deals are going to look extremely attractive, especially with the option of fixing in the cost of funds once the market reaches bottom. At 4.5% and below, Base Rate is extremely low by historic UK standards, especially when the demographics of the healthcare sector back up the long term demand for care, a demand that is not necessarily there in other sectors.

David Stephen Partners work with Hayden Associates who are specialists in Business Transfer for the Care Sector. If you are currently looking for opportunities to buy or need commercial funding advice, please do not hesitate to contact us on the numbers below.

David Burrows
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David Stephen Partners is an appointed representative of Sesame Ltd, which is authorised and regulated by the Financial Services Authority.Sesame Ltd is entered on the FSA register (www.fsa.gov.uk/register/)under reference 150427. The Guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK.