Care in the community: M&A in the healthcare services market

Over recent years, M&A activity involving care homes, pharmacies, health clinics and dental practices has been brisk, with consistently solid dealmaking figures and strong and growing interest from private investors and industry consolidators.

These businesses all offer distinct services, but can broadly be classed as providing vital health and social care services within communities. They are small, local services that are essential to people of all ages within their communities.

Given the specific distinctions that distinguish them, as well as their overarching similarities, there are both specific factors that have driven dealmaking within, say, care homes or dental practices, as well as common factors that have helped to drive activity across the broader industry.

The general factors

Solid, growing demand

Demand for healthcare services is growing. This isn’t necessarily to do with any degradation in the nation’s overall health, but rather the result of the UK’s ageing population.

It is a natural fact of ageing that older people require greater access to healthcare services – particularly those that serve local communities. That means greater demand for dental services, pharmacies, GPs surgeries and, of course, care homes.

This trend is unlikely to end anytime soon, either, with the UK’s population of people aged 85 or over expected to nearly double by 2045 – massively increasing the already high demand for community health services and long-term care facilities.

The strong demand also means that the sector is highly resilient. Put simply, people will continue to pay for healthcare services – so long as they can afford them – in a way that is simply not true for sectors such as retail or hospitality.

This was demonstrated during and after the COVID-19 pandemic, with demand for healthcare services (perhaps predictably) increasing as a result of the crisis. A similar trend was true of another analogous sector, the veterinary industry.

The veterinary sector, which has long been one of the UK’s most active for dealmaking, continued to perform strongly, in spite of the pandemic and recent economic turmoil, indicating that even during difficult times people will continue to pay for treatment for their pets. The same is perhaps even more true of healthcare.

As a result, institutional investors and private equity firms have taken greater interest in the sector, seeing it as a resilient sector offering stable cashflows and the scope for significant growth through M&A activity.

NHS in crisis

One of the most controversial aspects of growing investment in the healthcare market, as a whole, is how much it relates to the ongoing struggles of the UK’s National Health Service.

With NHS waiting times soaring over recent years and successive governments, so far, seemingly unable to tackle the issue, more and more patients (providing they are lucky enough to be financially able to) are moving towards private healthcare.

With greater numbers of people opting for the private healthcare route, the profitability of private clinics, practices and care home settings has increased – making them ever more attractive acquisition prospects for investors.

At the same time, the NHS has over recent years begun to lean far more heavily on the private sector to take the strain off its own services. This has resulted in increased government funding for healthcare services and encouraged significant private sector involvement in areas such as dental practices, pharmacies and GP clinics.

Tech and digital transformation

Like many other industries, the healthcare sector is undergoing rapid digitalisation and tech-driven transformation. This ranges from established practices such as digital pharmacy and telehealth services, to emerging breakthroughs such as AI-driven diagnostics.

Digital transformation means an influx of both public and private investment into the healthcare sector and is helping to make the operators that successfully incorporate new and emerging innovations highly appealing acquisition targets for buyers interested in the sector.

Fragmentation

Almost by their nature as healthcare operations designed to serve small communities, dentists, pharmacies, GPs and care homes are highly fragmented, with a huge number of disparate operations spread across the length and breadth of the UK.

Just to provide some insight into the figures: there are estimated to be around 12,300 dental practices across the UK; in 2024 the number of GP practices in England alone stood at slightly over 7,122; figures from 2024 put the number of UK pharmacies at around 13,300; while figures from earlier this year place the number of care homes at 16,566.

Among those not directly owned and operated by the NHS, the majority of these venues are independently owned businesses, with many owners likely only owning one or two locations within a single community.

As a result, the industry is highly fragmented and ripe for consolidation by buyers equipped with the finances to target rapid acquisitive growth and build economies of scale, whether they are private equity firms or well-capitalised industry incumbents.

Furthermore, although healthcare has proven a resilient and profitable industry over recent years, this does not mean that it has been immune from the numerous headwinds that have impacted UK businesses over recent years.

Rising costs in particular are a growing concern. A post-Brexit shortage in overseas workers has resulted in labour shortages, making staffing costs higher, while minimum wage increases are set to compound the issue.

As with any other physical business, high energy costs will also be an issue, while many operators will be affected by the increasingly strict Care Quality Commission (CQC) regulations.

The combination of these factors means that many smaller operators across areas such pharmacies, dentistry and care homes will be open to explore a takeover by a bigger outfit which could provide them with greater financial capabilities, ease their workloads and improve their staffing options.

Inbound UK M&A

Across the UK economy more broadly, overseas investors are perhaps more interested in UK assets than ever. A combination of the country’s leading position in many key industries, its status as a financial and cultural hub, a favourable regulatory environment, lack of a language barrier and, unfortunately, affordable company valuations and the lower value of the pound against the dollar, have all combined to make UK-based companies and assets highly attractive to powerful foreign buyers.

This is no different in the healthcare sector, with UK healthcare assets proving particularly attractive to investors from North America and Europe, drawn in by all the factors listed above and many more specific to the industry’s various subsectors.

Private equity piles in

Solid recurring revenues, high levels of fragmentation and the incorporation of new technologies are all things that generally help to guarantee one thing for a sector: private equity interest.

And, indeed, private equity buyers have been particularly active in acquiring community healthcare sites across the UK over recent years – offering an exit route, financial backing and, potentially, a life-changing acquisition fee to owners at struggling healthcare businesses.

The trend has proved particularly pronounced over recent years, with private equity firms hoovering up dental practices, care homes, GP clinics and pharmacies (as well as a huge number of veterinary practices).

According to Grant Thornton, private equity and venture capital buyers accounted for 45 per cent of all deals in the UK healthcare and pharma industry last year. Grant Thornton stated that several deals demonstrated a growing trend for PE-backed pan-European healthcare services groups acquiring UK businesses – such as FutureLife Group’s acquisition of the Bristol Centre for Reproductive Medicine (BCRM).

Pharmacies – M&A accelerates as independent traders struggle
Pharmacies, whether independent community operators or well-known major brands, are ubiquitous presences across the UK. As a business model, it may seem almost infallible. After all, there is never going to be a lack of demand for over-the-counter and prescription medication, especially with an ageing population.

However, despite this, the past few years have been far from plain sailing for the UK’s 13,000 or so pharmacies. Pharmacies have been hit by less favourable NHS contracts, rising wage costs and, like virtually all brick and mortar businesses, rising operational costs.

This has resulted in lower gross margins and a major profit squeeze that has driven a huge increase in M&A activity in the industry and led to predictions that consolidation will only continue over the coming years.

According to a recent report from accountancy firm UHY Hacker Young, 1,212 UK pharmacies were acquired in the year to June 30 2024, meaning that approximately nine per cent of the UK’s pharmacies were involved in a deal.

This figure represented a 50 per cent increase on the 809 takeovers reported in the previous year and UHY specifically link this major rise to the sector, as a whole, taking a sizeable hit on profits.

According to the firm’s research, gross profits per pharmacy fell by 10 per cent during the period, from £419,598 a year to £382,468 a year, a downward trend that predictably hit independent operators particularly hard.

John Lerston, pharmacy services and tax planning adviser at UHY Hacker Young, said that trading was becoming “increasingly difficult” for independent pharmacies, with profits falling and sites forced to close.

It’s not just independent operators who have been impacted, however, with several transactions involving major companies. Indeed, one of the biggest deals in the year to June 30 2024 saw national chain LloydsPharmacy sell off part of its 1,054-strong network as part of a divestment plan arranged by private equity owner Aurelius.

Even more recently, in March 2025, Walgreen Boots Alliance – owner of UK pharmacy giant Boots and American chain Walgreens – announced it would be acquired by private equity firm Sycamore Partners in a $10 billion take-private deal, following years of falling sales.

Speaking prior to the Walgreen Boots Alliance deal, UHY Hacker Young’s John Lerston stated that he thought it likely that the consolidation that has gripped the sector over recent years would continue.

He continued: “Lower gross margins under the NHS contract, rising wage costs due to the cost-of-living crises, and changes in the minimum wage and national insurance rates are squeezing margins.”

Naturally, this is leading many operators to consider leaving the industry, but it is also prompting some to explore acquisitions as they seek to boost profitability by accessing economies of scale, centralising back-office functions and improving their geographic coverage.

Just in the past couple of months, there have been notable acquisitions of portfolios of pharmacies by smaller and mid-sized operators seeking to capitalise on growing consolidation to boost their businesses.

At the beginning of March, Manchester-based Everest Pharmacy acquired five sites – four in Bolton and one in Accrington – from North West peer Sykes Chemist Group for an undisclosed sum.

The deal brought Everest Pharmacy’s network to 22 pharmacies across the North West and came following a strategic review by 14-strong group Sykes. The sale process was carried out by Christie & Co, with the property adviser’s Senior Business Agent Tom Young saying that a high volume of interest had been expected and that there were “multiple offers on all the sites”.

Later the same month, family-owned chain M&D Green Group acquired nine community pharmacies from N.R. Gordon Ltd (which trades as Gordons Chemist), increasing its network to 42 pharmacies across Scotland.

The deal continues an acquisitive streak that has seen M&D Green acquire 24 pharmacies over recent years, supported by banking partner HSBC.

US buyers flock to care home sector
Of all the subsectors of the healthcare industry, care homes are perhaps experiencing the most active M&A environment. Last year, care home deals in the UK were valued at a record total of £3.1 billion, according to data from Cushman & Wakefield.

As Cushman & Wakefield’s Head of Healthcare Tom Robinson explained, “the demographic isn’t going anywhere and there’s no magic bullet from the government to cause the market to change demonstrably”.

The second part of this comment hints at the most controversial aspect of M&A activity in the wider healthcare sector – but perhaps most acutely in the care home market: the growing involvement of private investors, many of whom are from overseas.

Such concerns will only be heightened by perhaps the most striking figure from the research: that 56 per cent of all acquisitions in the care home sector involved American investors. This trend was exemplified by last year’s biggest acquisition in the market: US real estate investor Welltower’s acquisition of major chain Care UK from private equity firm Bridgepoint.

American investors have been pouring into various UK sectors over recent years, attracted by the numerous acquisition and growth opportunities and lower valuations, while having established themselves as far more financially powerful than other potential UK or EU buyers.

In the care home industry, however, many view this influx as particularly alarming, reasoning that such owners will value profits over providing the best possible care for society’s most vulnerable.

Such worries appear to be justified to some extent by Cushman & Wakefield’s estimate that care homes increased their weekly fees by 8.5 per cent last year – despite the difficulty in securing rental growth in numerous other areas of the property market.

While there have been widespread calls for fundamental reforms of the social care sector, and an independent commission on the subject is due to publish a report in 2028, private investment into the sector shows little signs of slowing down.
There have recently been warnings that the increase in employer national insurance contributions will lead to more individual operators being forced to sell up, potentially increasing the number of acquisition targets available on the market.

In a Christie & Co survey, meanwhile, 59 per cent of care home operators reported an increase in local authority fee rates, with the majority noting an increase of between 5 and 10 per cent.

However, Christie & Co’s survey also showed that acquisitive appetite outweighs the desire to sell, indicating that operators are seeking to respond to rising costs through M&A activity. While 27 per cent of respondents stated that they planned to sell a care home over the coming year, 43 per cent said they were looking to buy.

Amid mounting concerns over the role of private and overseas investors in the UK care sector and how the cost and standard of care may be impacted, such high acquisitive sentiment may represent good news, indicating that there are independent operators looking to acquire new settings.

While private equity and US investors will undoubtedly remain major acquirers in the sector, there are likely to be some owners who will seek to safeguard their care homes by selling to an alternative buyer.



Fragmentation persists in dental sector
The dental sector is among the most highly fragmented in the UK healthcare industry. Of the approximately 12,300 dental firms across the UK, around 8,000 are independent single or dual practices, while a further 2,100 are owned by small groups, leaving 2,200 owned by corporate and larger groups, including private equity backed entities.

This fragmentation, combined with the sector’s robust cash flows, numerous avenues of value creation and potential for digital transformation and operational improvement, means that private equity interest in the sector is extremely strong. For instance, the UK’s largest operator MyDentist, which owns 532 practices, is backed by PE firm Turnstone equityco 1 Limited.

However, research has shown that approximately three in five dental practice acquirers are independent operators, while 70 per cent of buyers live within a 70 kilometre radius of their targets.

This indicates that, despite strong private equity interest, the dental market remains a considerable distance from widescale consolidation. With the US market far more consolidated, and such attractive conditions in place, this seems bound to change over the coming years.

For a deep dive into the issue, check out our recent analysis of M&A in the UK dental industry.

GP clinics – Poised for more M&A activity?
When we think of healthcare in the community, perhaps the first thing that comes to mind is your local GP surgery. As typically people’s first and closest point of contact for medical issues, GPs are the bedrock of local healthcare services.

Overall, the sector has shown a trend of general consolidation over recent years, without reaching the levels of activity seen in the dental and care home industries. This increase in activity has coincided with a time of increasing financial and operational challenges that many GP practices have faced, amid the overall NHS crisis, the impact of COVID-19, a soaring patient backlogs, post-Brexit staffing issues and rising operating costs.

Perhaps understandably, this has led to consolidation within the industry. According to figures from IBIS World, there were 7,122 general medical practices in the UK in 2024, representing an annual decline of 0.7 per cent from 2019.

Naturally, this has resulted in considerable and growing interest from outside investors, keen to capitalise on the sector’s strong revenues, high fragmentation and the growing demand for private healthcare services amid the NHS’s ongoing struggles.

Centric Health, a GP practices operator backed by Rothschild alternative assets business Five Arrows, has grown both organically and through acquisitions, building up a network of close to 80 clinics across Ireland.

Overseas buyers have taken a growing interest, with major deals including the 2021 acquisition of primary care service provider AT Medics, which operates 37 HP practices in London, by Operose Health – at the time a subsidiary of US health insurance giant Centene Corporation.

Of course, as with the care home market, such activity can be highly contentious due to regulatory issues and concerns around the role of private capital in vital frontline healthcare services.

Looking again at Operose Health: in December 2023, the company was acquired by HCRG Care Group – owned by private equity firm Twenty20 Capital – in a deal that attracted a notable degree of regulatory scrutiny over concerns about operating without formal permission from NHS commissioners.

Despite such concerns, it seems likely that private equity interest in the market will continue to grow. Last year, US PE firm KKR made an unsuccessful £1.56 billion bid for Assura – an NHS landlord that owns more than 614 primary medical care centres, including many GP surgeries – and returned with an improved bid earlier this year.

While the deal hasn't (yet) happened, such a major offer from an overseas PE firm illustrates the significant interest in the sector and the potential for major M&A activity over the coming years – particularly if the NHS crisis does not abate.


There have been several years of extremely busy activity across the community health sector, and dealmaking shows very few signs of slowing down. Industry incumbents and, perhaps more notably, private investors are particularly attracted to the scope for M&A-driven growth that the sector, as a whole, offers.

While consolidation has been ongoing, this scope remains undiminished, with care homes, dental practices, pharmacies and GP surgeries all areas that remain highly fragmented and largely home to small or independent operators – many of whom are coming under increasing financial pressure.

As a result, ongoing dealmaking seems certain. What also seems certain, however, is that the debate around the role that outside investors, such as private equity firms, should play in healthcare will become even more intense as dealmaking continues.

See the list of medical and healthcare businesses currently for sale in the UK

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