BERLIN, June 1 (Xinhua) -- International financial investors are demonstrating a growing appetite for assets in German health care sector, a study by the management consultancy Bain & Company found on Friday.
According to the study, private equity funds invested a total of 10.9 billion euros (12.8 billion U.S. dollars) in the sector in Europe in 2017, with the bulk of investments being concentrated in Germany. The figure marked a threefold increase over the previous year.
Bain & Company highlighted that two deals in the German health care sector last year were amongst the biggest recorded in the global private equity industry. The financial investors Bain and Cinven purchased a controlling stake in the pharmaceutical company Stada for 4 billion dollars, while Nordic Capital took over the nursing home operator Alloheim Senioren-Residenzen for 1.3 billion dollars.
Study author Franz-Robert Klingan explained that much of the attraction of the German health sector to private equity investors owed to the circumstance that it was relatively shielded from the effects of cyclical up- and downswings in the wider economy. Additionally, the country's rapidly aging society meant that there was growing demand for medicines and nursing home places.
"Germany plays an important role in the considerations of private equity funds, not least because the average age is higher than that in any other European Union member state at 45.8 years", a statement by Klingan read.
The influx of international financial investors is a source of concern for trade union representatives, however, who have expressed fears that pharmaceutical producers, nursing home operators and other health care organizations in Germany could face more pressure to raise their profitability. Private equity funds traditionally only acquire holdings in firms for short- to medium-term periods with the goal of subsequently selling their assets on to others for a higher price.
The German trade union ver.di estimates that private equity involvement has increased more than four-fold in the sector over the past two years to reach a record of 43 acquisitions in 2017. Ver.di warned that private companies were consequently receiving a "fast-growing share" of German health care expenditure, especially in old-age nursing.
Ver.di federal director Sylvia Buehler complained on Friday that some international investors were resorting to dubious methods, such as trying to weaken collective wage agreements, in their hunt for yields. "Nursing should be about humans and dignity, not about profit maximization', Buehler argued.
The majority of nursing homes in Germany are run by the church and communal governments. The industry is suffering from a severe shortage of skilled labor, leading Health Minister Jens Spahn (CDU) to propose recently that the government should offer financing for the employment of more than 8,000 additional nursing home workers in the current legislative period.