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Presentation at Healthcare Business International Conference London April 2018

Presentation gives an overview of the Dutch healthcare market and profiles of key sectors in the market

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London, 10 April 2018
Investment Opportunities
in Dutch Healthcare Market
2
Background & goal of presentation
Background
• In most European markets
commercial organizations are
providing an increasing share
of healthcare services
• Up until recently the role of
commercial healthcare
organization in the Dutch
market has been relatively
limited, as has investments
from international healthcare
companies
Meeting Objectives
• Provide a general overview of the
Dutch health care system
• Suggest reasons why the Dutch
market is an interesting opportunity
for international healthcare
companies looking for growth
opportunities
• Provide snapshots of key segments
of the healthcare sector that are
attractive for foreign investors
3
The Netherlands offers an attractive healthcare market
Key facts and figures:
• Population 17.1 million
• GDP rank per capita : Nr.
13 in the world
• Healthcare spend per
population : $5400 Nr. 8 in
the world)
• Politics : Middle of the road
• Current coalition
government liberal-
centrist
• Long-term trend
towards liberalized
healthcare
• Vast majority of healthcare
provided by non-profit
organizations
Future outlook:
• No dramatic changes in
political environment
expected
• Strong growth in elderly
care and traditional
providers not well
positioned to develop more
capacity
• Growing portion of elderly
care provided by for-profit
players
• Growth in for-profit
provision in other parts of
social care market from
small base
• Consolidation and
international participation
increasing
4
Dutch spending on healthcare and social care will double
between now and 2040
Historical and expected spend on healthcare and
social care
 In the period 1975 to 2015 the annual
growth in total Dutch healthcare was 2.6%
(CAGR)
 In resent years the growth has been lower
(even negative) due to a weak economy
and hard controls on cost developments
 The Ministry of Health expects an annual
growth in spend of 2.9% in the coming
years. This is based on a average growth
of 1.7% above demographic changes
 Spend on health as a percentage of GDP
will grow from 12.7% in 2015 to 16.4% in
2040
Comments
Note: Excludes spend on general social care, youth care, and kindergartens, All amounts in 2015 Euros
Source: Ministry of Health – WTV 2018 (https://www.vtv2018.nl/zorguitgaven).
5
Key aspects of Dutch healthcare ecosystem
 Dutch healthcare is financed through a mixture of private, employer, and state financing
• Cure-related activities (primary care, hospitals, etc.) are financed through a mandatory insurance
scheme organized through health insurance companies
• Long term and social care financed by local and central government
 Healthcare is politically well positioned with broad acceptance for high quality healthcare that is
available to everybody. There are no regional differences in laws, regulation, or political positioning.
There is a long-term trend towards a more liberalized healthcare sector
 Most healthcare today is provided by non-profit foundations. These sometimes have a history going
back hundreds of years. The largest are the result of a continuous stream of mergers
 There is a growing commercial sector with a focus on upscale elderly care and independent clinics
providing different forms of elective surgery
 There is a growing interest in the Dutch market from international healthcare companies
• Orpea has acquired a provider of long-term mental health services and a chain of nursing homes
• Turkish hospitals groups have developed hospitals in Amsterdam
• Unilabs has entered Dutch market through acquisition

6
Overview of key segments
Segment Key attributes
Nursing homes • Large market with strong growth
• Attractive opportunities for international entrants
Disabled care • Large market with attractive opportunities
• Good acquisition opportunities
Hospitals • Fairly unattractive market facing increasing pressure on costs
• Opportunities for helping hospitals reduce costs and/or improve
financing
Diagnostic labs • Market very ripe for consolidation
• First international organizations (Unilabs) active
Private clinics • Market consolidation started
• Still many opportunities for acquisition
Psychiatric care • Split between large traditional incumbents offering broad portfolio and
focused commercial operators
Dentistry • Market still very splintered
• Opportunities for consolidation at national and European level

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Presentation at Healthcare Business International Conference London April 2018

  • 1. London, 10 April 2018 Investment Opportunities in Dutch Healthcare Market
  • 2. 2 Background & goal of presentation Background • In most European markets commercial organizations are providing an increasing share of healthcare services • Up until recently the role of commercial healthcare organization in the Dutch market has been relatively limited, as has investments from international healthcare companies Meeting Objectives • Provide a general overview of the Dutch health care system • Suggest reasons why the Dutch market is an interesting opportunity for international healthcare companies looking for growth opportunities • Provide snapshots of key segments of the healthcare sector that are attractive for foreign investors
  • 3. 3 The Netherlands offers an attractive healthcare market Key facts and figures: • Population 17.1 million • GDP rank per capita : Nr. 13 in the world • Healthcare spend per population : $5400 Nr. 8 in the world) • Politics : Middle of the road • Current coalition government liberal- centrist • Long-term trend towards liberalized healthcare • Vast majority of healthcare provided by non-profit organizations Future outlook: • No dramatic changes in political environment expected • Strong growth in elderly care and traditional providers not well positioned to develop more capacity • Growing portion of elderly care provided by for-profit players • Growth in for-profit provision in other parts of social care market from small base • Consolidation and international participation increasing
  • 4. 4 Dutch spending on healthcare and social care will double between now and 2040 Historical and expected spend on healthcare and social care  In the period 1975 to 2015 the annual growth in total Dutch healthcare was 2.6% (CAGR)  In resent years the growth has been lower (even negative) due to a weak economy and hard controls on cost developments  The Ministry of Health expects an annual growth in spend of 2.9% in the coming years. This is based on a average growth of 1.7% above demographic changes  Spend on health as a percentage of GDP will grow from 12.7% in 2015 to 16.4% in 2040 Comments Note: Excludes spend on general social care, youth care, and kindergartens, All amounts in 2015 Euros Source: Ministry of Health – WTV 2018 (https://www.vtv2018.nl/zorguitgaven).
  • 5. 5 Key aspects of Dutch healthcare ecosystem  Dutch healthcare is financed through a mixture of private, employer, and state financing • Cure-related activities (primary care, hospitals, etc.) are financed through a mandatory insurance scheme organized through health insurance companies • Long term and social care financed by local and central government  Healthcare is politically well positioned with broad acceptance for high quality healthcare that is available to everybody. There are no regional differences in laws, regulation, or political positioning. There is a long-term trend towards a more liberalized healthcare sector  Most healthcare today is provided by non-profit foundations. These sometimes have a history going back hundreds of years. The largest are the result of a continuous stream of mergers  There is a growing commercial sector with a focus on upscale elderly care and independent clinics providing different forms of elective surgery  There is a growing interest in the Dutch market from international healthcare companies • Orpea has acquired a provider of long-term mental health services and a chain of nursing homes • Turkish hospitals groups have developed hospitals in Amsterdam • Unilabs has entered Dutch market through acquisition 
  • 6. 6 Overview of key segments Segment Key attributes Nursing homes • Large market with strong growth • Attractive opportunities for international entrants Disabled care • Large market with attractive opportunities • Good acquisition opportunities Hospitals • Fairly unattractive market facing increasing pressure on costs • Opportunities for helping hospitals reduce costs and/or improve financing Diagnostic labs • Market very ripe for consolidation • First international organizations (Unilabs) active Private clinics • Market consolidation started • Still many opportunities for acquisition Psychiatric care • Split between large traditional incumbents offering broad portfolio and focused commercial operators Dentistry • Market still very splintered • Opportunities for consolidation at national and European level
  • 7. 7 Nursing homes Market Size: €8.4 bln Profitability Low for traditional / incumbent organizations High for commercial players Expected growth: High (combination of extra financing and growing elderly population) Market structure Traditional players are non-profit foundations that vary in size from large conglomerates with 20-30 locations to small local players Commercial players mostly focused on luxury end of market with small-scale locations. Divided into small “mom & pop” single location organizations to chains of up to 20-30 locations Trends • Growing elderly population • Ongoing consolidation in commercial market and increasing competition in luxury end of market • Growing need for middle market solutions and new location • Many traditional players with weak financial position unable to finance growth • First acquisition by foreign player (Orpea) Opportunities • Acquisition of commercial elderly care organizations (several on the market) • Acquisition of (parts of) traditional organizations (probably with financial / quality issues) • Partnership or stand alone activities to develop new locations (operational and /or real estate)
  • 8. 8 Disabled care Market Size: €9.7 bln Profitability Positive, but low for traditional organizations and higher for small organizations. Opportunities for improvement Expected growth: High Market structure Large non-profit organizations dominate the sector. Very visible and successful for- profit organizations also active (Thomashuizen with more than 100 franchises). Trends • Strong growth in last few years due to growth in number of clients and more complex issues per client • Responsibility for “lighter” care (not 24/7) transferred to municipalities • Entry of foreign players started through acquisition of WoonZorgNet by Orpea Opportunities • Acquisition of commercial party active in the market • Acquisition of (parts of) traditional (non-profit) organization (most probably if organization is in financial trouble) • Greenfield start-up through transfer of proven concept from other markets
  • 9. 9 Hospitals Market Size: €27 bln (2016) Profitability Good for larger hospitals Low for smaller hospitals Expected growth: 2-3% last few years. Agreements for government to limit growth to 1% per year Market structure 126 hospitals in the Netherlands, of which 8 are academic and the rest general hospitals. Size of hospitals ranges from 200 to almost 1.400 beds. Hospitals mostly run as independent non-profit foundations. Three private for- profit hospitals (MC Groep and Zorg van de Zaak) Trends • Concentration of activities in fewer hospitals (driven by quality and costs) • Move of planned operations to specialized private clinics • Pressure to reduce length of hospital stays and moving activities to primary care • First foreign entrants have entered market • Targeted cost savings of € 2 billion from hospitals in next few years Opportunities • Acquisitions / joint ventures with smaller regional hospitals facing financial challenges • Assisting hospitals to reduce costs • Helping hospitals free up capital through real estate financing
  • 10. 10 Diagnostic labs Market Size: Appr. € 1.8 bln. Profitability Low to medium Can be improved through economies of scale Expected growth: In line with overall sector Market structure Market is very splintered with appr. 400 organizations offering services. Max size is turnover of €50 million. Many small non-profit organizations offering services to GPs and many hospitals with own labs. Limited number of private for- profit players, some backed by private equity Trends • Ongoing consolidation of market, but not very quickly • Increased cost pressure on hospitals likely to be driver of further consolidation • First international company (Unilabs) has acquired Medlon with 450 employees and strong position in the eastern part of the Netherlands Opportunities • Acquisition of existing commercial organizations • Buy and build of labs serving one hospital
  • 11. 11 Private clinics Market Size: €0.8-0/9 bln Profitability Depends on situation of individual clinic (scale, cost efficiency, growth phase, etc.) Expected growth: High, but dependent on government cost containment actions Market structure Currently approximately 150 organizations with around 360 individual clinics. One dominant chain (after merger of Bergmans and NL Clinics). Many smaller chains with 4-5 clinics focusing on one specialization Trends • Market growth through demographics (will vary per segment) • Higher demands on efficiency through centrally mandated cost reductions will be positive for cost- effective clinics • Entrance of foreign players • Ongoing consolidation Opportunities • Greenfield establishment of clinic • Acquisition of individual specialized clinics as part of European chain • Acquisition of larger chain (Bergman Clinics)
  • 12. 12 Psychiatric care Market Size: €6.6 bln Profitability Low for large traditional organizations. Good for small and focused organizations Expected growth: 2.4% per year Market structure Split between (short-term) cure and (long-term care) with traditional organizations providing broad range of services. Sector dominated by a few large organizations, but 60% of service providers have less than €10 mln revenues A number of commercial chains providing basic mental care and help with addiction problems Trends • Short-term pressure on growth due to move away from in-patient treatments and restructuring of financing forms • Merger of traditional players to create economies of scale • Ongoing growth on focused commercial organizations Opportunities • Acquisition of focused commercial organizations with fit to pan-European organization • Acquisition of (part of) traditional organization (typically in financial problems)
  • 13. 13 Dentistry Market Size: €3 bln Profitability Good, and opportunities to improve through scale effects (both revenues and costs) Expected growth: Demand expected to stay stable through mixture of demographic effects Market structure 5.100 dentistry locations, of which almost 60% are solo practitioners Growth of multi-chair locations with more employees per location 10% of locations are part of (national) chains Number of chains owned by private equity as part of European groups Trends • Move in demand to more complex care (aging population, etc.) and cosmetic care • Increasing number of dentists wanting to be employed and work part-time • Move to multi-dentist locations and further consolidation in the market Opportunities • Acquisition of small/medium size chains as starting point for national buy-and build as bolt-on to existing international chain • Acquisition of larger chain to develop pan- European group
  • 14. 14 Next steps  Do you need: • More information on the general market situation in the Netherlands? • More information on one of the sectors highlighted in this presentation? • Information on another sector? • Information on a specific company in the Dutch healthcare sector? • Assistance in getting in contact with a specific company in the Dutch healthcare sector? • Assistance in an ongoing acquisition process (transaction and / or implementation)?  If yes – contact Rune Aresvik: • Rune.Aresvik@Vardetun.com • +31-652-412 375