News

M&A opportunities in healthcare field

Trường Lăng

June 8, 2022

News

M&A opportunities in healthcare field

Trường Lăng

June 8, 2022

In the year of 2021, the consumer credit finance and digital payment fields was a leading in merger and acquisition trends (M&A), with such deals as SMBC Financial Company acquiring 49% of FE Credit’s shares for $1.4 billion; VNLife raised $ 250 million in Series B from the investor group led by Dragoneer Investment Group and General Atlantic, with the participation from PayPal Ventures and EDBI.

If there were usually at least one or two notable deals in the healthcare field every previous year, such as GIC’s investment in Vinmec, VinaCapital’s investment in Thu Cuc Hospital (in 2020), or Quadria Capital’s investment in FV Hospital (in 2017), popular M&A deals in this field were completely absent in 2021.

The limited quantity of M&A transactions in the healthcare field does not mean that foreign investors are not interest in this field, but foreign investors may be hard to find suitable target companies, or they encounter some obstacles in the process of carrying out the investment deals.

In fact, healthcare is still an attractive investment in Vietnam. Expense on health care per capita tends to increase in a long time. The serious budget and capacity problems are being faced by public hospitals are the opportunities for foreign investors to promote the healthcare system by increasing hospital bed capacity/ private clinics as well as contribute to the economic growth of Vietnam.

Notwithstanding the severe impacts caused by the pandemic, Vietnam has recorded positive GDP growth in both 2020-2021 and the growth will be ready to recover quickly thanks to the high rate of Covid-19 vaccination and the easing of travel restrictions.

These positive signals bring the healthcare service field many new opportunities although there are still some difficulties and obstacles.

Private hospitals and clinics

Private hospitals play an important role in relieving the burden of severe overcrowding in public hospitals in the big cities. In the recent years, many foreign investment transactions in private hospitals and clinics are recorded in Vietnam, there are, however, still some challenges, commercial and legal barriers that may prevent foreign investment in this area.

One of the biggest challenges is the prohibition of foreign ownership in the enterprises that engage in the distribution of pharmaceuticals. Although some enterprises are actively seeking the way to develop the retail pharmacy spaces, the majority of pharmaceutical distribution activities in Vietnam still takes place in hospitals in the form of independent small drugs’ stores.

It is necessary for private hospitals to restructure, or take other steps to allow foreign investors to participate in hospital business. Restructuring can cause the unnecessary complications for the business activities as well as a series of other difficulties.

To resolve this problem, the Government should consider for easing the foreign investment restrictions imposed on the pharmaceutical distribution industry. Such easing not only makes private hospital M&As for foreign investors less complicated, but also benefits the developing pharmaceutical retail industry.

The solution dedicated for hospitals and clinics is that the Government may remove the overseas ownership prohibiting regulation on pharmaceutical distribution operated as a part of private hospital or clinic function.

Another long-standing problem for private hospitals and clinics is the difficulty in recruiting and retaining qualified doctors and medical workers, particularly in the specific specialties.

The solution applied on this problem is to promote the training and development of Vietnamese doctors and other medical practitioners. And that the reduction of the requirements for foreign medical practitioners, for example, the fluency in Vietnamese language is not required anymore, allowing Vietnamese patients to use foreign languages when their doctors are foreign; the certified medical interpreters are employed. This will make it easier for skilled foreign doctors to practice in Vietnam.

In addition, there are very few private hospital franchise chains in Vietnam with the facilities based in provinces and cities. This is a trade barrier for some types of foreign investment as the  hospital’s only property may not be as attractive as a nationwide and scalable chain of the facilities in the terms of growth perspective. If the operators of domestic private hospitals and clinics consider to cooperate or sell foreign investor products in the healthcare field, they should carefully consider an expansion-based growth strategy.

Specialized private clinics

Besides private hospitals and clinics, specialized private clinics are also very attractive for investment. During the past time, there are a few financial and strategic investments by foreign investors into this type of business in the market. 

Specialized private clinics also face some problems as same as private hospitals. As the difference in size, specialist private clinics’ fund deficit rate is less. They can easily expand their size into the domestic chains and they can benefit to the society thanks to patient access increase to high-quality healthcare services outside of the big cities.

Clinical/laboratory diagnosis

Foreign-invested diagnostic/testing companies have been operating in Vietnam for many years. Meanwhile, very few Vietnamese enterprises in this field are able to attract funds from foreign investors

Existing facility and licensing requirements for a clinical/laboratory service enterprises are often difficult to comply with and are not necessary for high-reliability services. Like some other industries in Vietnam that are quite fragmented, the diagnostic/testing field is being considered as a low volume/low quality business. In addition, quality control is also a matter.

Whether this field becomes a viable, attractive target for foreign investment on a scale that is bigger than it has been in the past, a further consideration should be done. However, if we follow the model in other countries in Asia, this field will certainly become a viable, attractive target thanks to effective and appropriate regulations, encourage innovation and development. In particular, the diagnostics/testing field also offers some attractive opportunities to accelerate the digitalization of the healthcare economy in Vietnam.

Medical technology and telemedicine

Innovative, digital business models related to healthcare are possible to develop in Vietnam as some problems to the current system can be solved by increasing digitalization and innovation. In the recent years, a significant increase of digital enterprises engaged in various fields in Vietnam, including a number of technology companies that have really registered their trademark. There’s no reason why the healthcare field shouldn’t benefit from this innovation.

The policies have been introduced by the government to encourage the digitization of healthcare services, including promoting the digitization of medical records. This will facilitate the operation of medical technology businesses in the future. Such efforts should be going on as part of Vietnam’s economy broader digitization promotion in the coming years.

In addition, any development aimed at reducing the frequency of hospital visits from long distance and providing such safe and efficient healthcare services as telemedicine platforms that could relieve the burden that is faced by the domestic big hospitals.

Unlike some other countries in Asia, there has not been any significant foreign investment in medical technology businesses in Vietnam. The reason may be that enterprises operating in this field are still in the early stages and their size are not big enough to attract foreign investment. Another factor affecting some fields with technology background in Vietnam is the lack of clear legal regulations to ensure the enterprises’ stable operation as well as the safety of their consumers.

Foregoing is a few points of view to be reviewed by the Government to develop and perfect the legal regulations in the field of healthcare investment to attract foreign investment.

Source : Baodautu

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