Is Spanish mental health hotting up?

Recent activity in Spanish psychiatry and mental health suggests growth on this market is picking up speed. Who are the emerging consolidators? We speak to market experts following this space.

Private equity began making inroads into the sector in 2016 when Iberian investor Magnum Partners bought a 75% stake in eating and behavioural disorder specialists ITA. The company, which saw revenues of €13.4m and net profits of €1.7m in 2017, bought Previ group last year, a business with four centres in Valencia, and a psychiatric clinic in Godella. This year, under new CEO Jaume Raventós Monjo, the company has already acquired a new centre in the Barcelona region and expanded to Chile, joining competitors Grupo 5 and DomusVi.

Grupo 5, backed by Corpfin Capital since 2017, operates in a segment called ‘psychosocial rehabilitation’ and is mostly contracted by regional authorities to deliver community-based care with a mix of home care, outpatient and inpatient facilities. Last month the company acquired a neurological treatment centre in Navarra, and it announced aggressive plans to expand across the country last year.

The big fish here – DomusVi – had been focusing its expansion in its reference market of nursing homes, but this year it created the brand Mentalia Salud under which all eight of its psychiatric and mental health facilities will operate. The group acquired a facility in the Canaries with 74 beds last month – bumping DomusVi’s total mental health offering to 1,000 beds, run by a team of 550 employees.

“The private sector is playing catch up here,” says Stéphane Pichon of Your Care Consult. “We think there will be new entrants onto this market from European groups other than the French – possibly from Germany or the Netherlands.”

Even Orpea joined the bid for a position, with its acquisition of 82-bed facility Clinica Lopez-Ibor (€5m) in 2017. But a leading consolidator has yet to emerge.

“The private offer is really fragmented,” says David Alberti of Your Care Consult. “There is margin to consolidate, but with small deals. Historically, the sector has been dominated by religious orders who remain the most active players,” he adds.

“The biggest is Hermanas Hospitalarias holding 43% market share with 6,000 beds. Though non-profits are currently investing capex into current facilities and also developing homecare and daycare, it is possible private players could buy out non-profit facilities.

“One of DomusVi’s strategies with nursing homes is to buy from the Church,” adds Pichon. “So it’s something they could replicate in mental health.”

Our Analysis: The Spanish mental health sector is seeing momentum pick up as private equity and large French groups roll out their growth strategies. For now, opportunities for investment abide in small private settings, but with such a large portion of beds owned by non-profits and the public sector, it remains to be seen how the private sector will consolidate its share. Will a single consolidator emerge? Perhaps a player that can crack the delivery of integrated services – which, according to ITA’s CEO Raventós Monjo, is the private sector’s next challenge – will set themselves apart.

We would welcome your thoughts on this story. Email your views to Anaïs Charles or call 0207 183 3779.