Health and education businesses entered 2024 with continued demand for more efficient healthcare, preventative services, digital learning and technology-supported delivery models.
Polestar Corporate Finance’s Health & Education 2023/2024 Sector Review and Outlook explores M&A activity, valuation trends and investor appetite across Healthtech, hospitals and care centres, managed care, Edtech and training.
With the exception of managed care, health and education transaction volumes declined in 2023 compared with the elevated activity recorded during and immediately after the COVID-19 pandemic.
The sector recorded:
Global Healthtech deal volumes almost halved between 2022 and 2023 as investors assessed which businesses would emerge from the earlier period of rapid investment.
Differences between seller and investor valuation expectations also affected activity. Trade transactions were expected to support the market while those expectations became more closely aligned.
The UK economy performed better than expected during 2023.
House prices declined by 1.8%, compared with an anticipated reduction of 8%, while GDP grew by approximately 0.5% rather than contracting by the forecast 1%.
However, economic growth was concentrated in the first half of the year. GDP declined by 0.1% in the third quarter and 0.3% in the fourth quarter.
Headline inflation fell from 11.1% in October 2022 to 4% in December 2023. Core inflation remained at 5.1%, reflecting a tight labour market, services inflation and businesses passing higher costs to customers.
Higher interest rates continued to affect asset-intensive and debt-dependent businesses, including hospitals, hospices and care homes.
AI was expected to have an increasing influence on business operations during 2024.
Traditional AI analyses large datasets and identifies patterns, while generative AI can use that information to create new content or data.
Several questions remained unresolved, including:
These uncertainties created additional risk for lower middle-market businesses deciding when and how much to invest in generative AI.
The Internet of Things supported AI development by connecting devices and enabling them to communicate with cloud technology. These systems could automate processes and collect large volumes of data for use in AI-supported services.
For smaller businesses with limited resources, priorities included preparing their infrastructure, IT-service management and cybersecurity for future automation.
Long-term healthcare growth depended on developing cost-effective solutions for important demographic groups.
An ageing population increased the number of care-intensive patients and the associated cost of treatment. Solutions that enabled elderly patients to remain at home could reduce pressure on hospitals, hospices and residential care facilities.
Health insurers also encouraged preventative health measures. Direct Line offered smart-health applications and private GP appointments to its 1.2 million customers, alongside benefits such as gym discounts and wearable technology.
Wearable Healthtech maintained its growth during 2023. Garmin’s third-quarter revenue increased by 13% year on year to $1.28 billion.
Novo Nordisk reached a market value of $500 billion following the international success of its type 2 diabetes and weight-loss drug, Ozempic.
Demand for the treatment reflected the increasing use of long-term medication. During 2024, attention was expected to remain on the efficiency, value and production capacity of pharmaceutical products required to meet this demand.
At-home health testing became more accessible during 2023.
UK Femtech business Hertility Health raised £1.9 million in its third funding round in May 2023.
Octopus Ventures had provided £5.8 million of capital to Femtech start-ups, making it the largest investor identified within this emerging market.
Healthcare organisations made greater practical use of 3D printing during 2023.
The technology had been approved for producing personalised dental implants and prosthetics. Manufacturers of 3D printers were also positioned to benefit as larger hospitals considered investment in in-house robotics.
Wearable devices were increasingly being used to monitor patients remotely and allow them to remain on virtual wards at home.
Virtual wards reduced the cost of care while allowing patients to remain in familiar surroundings, creating particular benefits for elderly care.
Telemedicine also offered ways to reduce missed NHS appointments, which totalled approximately 122 million annually. Relevant solutions included:
Some 53% of people economically inactive because of long-term illness reported suffering from depression, anxiety or related conditions.
This created demand for services and applications such as Companion, which provided expert-led online training to improve and maintain mental wellbeing.
AI and machine learning supported the analysis of large healthcare datasets, creating opportunities in diagnosis and drug development.
AI-assisted mammography demonstrated accuracy comparable with a standard double reading while requiring a fraction of the time.
Medical robotics also continued to develop across training, research and treatment.
Neuralink had received approximately £700 million across seven funding rounds, while Synchron raised £190 million for electrodes capable of detecting electrical activity in the brain.
Consumers were becoming more willing to invest in personalised and preventative healthcare.
ZOE provided an at-home nutrition service that monitored blood glucose levels and generated personalised meal recommendations. Customers purchased a testing kit and subscribed to access their nutrition plan.
By early 2024, ZOE had raised £81 million in venture capital.
The NHS was also using digital services to make preventative care more accessible. The NHS App and online consultations supported self-management by helping individuals monitor their health and lifestyle.
Investment in human resources and administrative systems aimed to reduce the burden on healthcare professionals.
Automating payroll, workforce management and other administrative processes enabled medical employees to dedicate more time to patient care.
Patient platforms were also being used to register details, notes and concerns, providing families and carers with more information about changes to care programmes.
Consolidation continued across school-management information systems and private education.
UK schools and universities also expanded internationally. Harrow, Brighton College and the University of the Arts London were among the institutions opening overseas locations.
The UK education system remained influential in countries including China and India.
Peer-to-peer learning expanded significantly during the pandemic and became an established element of post-school education and professional training.
The model supported flexible learning and encouraged development through conversations and exchanges between participants.
This was particularly relevant to healthcare training, where the quality and availability of education directly affected the future healthcare workforce.
Digital teaching systems used machine learning to provide additional learning support and make education more accessible.
The technology could identify when a learner required assistance from a human teacher and help facilitate that interaction.
Some 53% of undergraduate students were using adaptive study tools by January 2024.
Adaptive learning was expected to become increasingly popular for both classroom and home study during 2024.
Downloadable products and applications were expected to attract more immediate adoption than the metaverse and virtual-reality education during 2024.
Zzish operated digital question banks designed to increase accessibility for students and reduce administrative tasks for teachers.
Education technology businesses also continued to integrate their products into mainstream school resources. Digital examination preparation was one area of development.
Irish Edtech business Examfly raised €1.5 million in seed funding in early 2024. The funding followed a slower investment period in 2023 but demonstrated continued investor interest where greater market stability could be identified.
The NHS was projected to face a staffing shortage of more than 570,000 people by 2036.
This increased the need for UK-based healthcare training, including technology-supported solutions providing flexible learning and career progression.
Training was also expected to help businesses address wider skills shortages.
Governments increasingly recognised the importance of sustainability education.
The UK Department for Education developed a sustainability and climate-change strategy intended to help the education sector and children’s services encourage environmental action.
Public Healthtech EBITDA multiples declined slightly towards the end of 2023.
The market remained varied because Healthtech businesses addressed different global healthcare needs. Smaller start-ups continued to create competition alongside more established businesses.
Managed-care multiples remained stable during 2023, although below those of some adjacent healthcare verticals.
Investors continued to receive a steady stream of income from the sector. Technology development also supported more efficient care and disease detection.
A system developed by Johns Hopkins University detected sepsis earlier than traditional methods, reducing the risk of death by 20%.
Investment moved away from physician-practice management businesses during 2023.
Debt-funded acquisition strategies, leveraged capital structures and limited physical assets contributed to falling EBITDA multiples. Investors increasingly favoured Healthtech and pharmaceutical services.
Edtech valuations followed similar seasonal patterns in 2022 and 2023, increasing as schools selected technology for the new academic year.
E-learning was forecast to grow to $462.6 billion by 2027.
Training multiples remained stable, with a small increase towards the end of 2023.
Demand for staff development and broader ESG-related training was expected to support valuations during 2024.
Venture capital and accelerator firms supported health and education transaction activity during 2023.
Early-stage funding was expected to help create a larger transaction market during 2024 and 2025 as portfolio companies developed.
Gener8tor completed seven Edtech investments during 2023.
The accelerator supported AI and analytics companies designed to improve children’s learning and engagement inside and outside the classroom.
Y Combinator completed four Healthtech investments.
It combined early-stage investment with a six-month programme intended to help start-ups establish and grow their businesses.
Patheon International completed two hospitals and care-centre investments.
Its investments included a specialist medical and surgical eye-care consultancy and a healthcare network operating hospitals, rehabilitation facilities, behavioural-health hospitals and other care sites.
Techstars completed five managed-care investments.
The organisation supported technology designed to improve the organisation, connectivity, productivity and effectiveness of managed-care services.
Andreessen Horowitz completed eight training investments during 2023.
Its transaction sizes ranged from approximately £1 million to £600 million.
Houghton Mifflin Harcourt completed two Edtech acquisitions during 2023.
Trade activity in Edtech remained lower than private equity and venture capital activity, but was expected to increase as start-ups developed and shareholders considered exits.
EVA Pharma invested in Healthtech to expand its technology offering and increase its market position.
Novant Health completed three acquisitions across hospitals and care centres.
It acquired US hospitals and managed-service providers during 2023, with further M&A interest expected during 2024.
The American Heart Association invested in businesses aiming to create social change within care.
Its investment in ConnectCareHero was its third transaction during 2023. It invested more than £3 million across the year.
Ellucian, backed by Blackstone and Vista Equity Partners, agreed to acquire Tribal Group for £172 million in May 2023.
Both businesses provided data-management and student-information software. The acquisition was intended to support the growth of Ellucian’s student-information-system portfolio.
Baxter International invested £6 million in Caretaker Medical in April 2023.
Caretaker Medical developed wireless monitoring technology that automated patient reporting and used pulse decomposition and AI algorithms to support hospital testing.
Surge Therapeutics raised £26 million in Series B funding in May 2023, giving the company a post-investment valuation of £105 million.
The funding was intended to support development of its immunotherapy technology and improve patient journeys through hospitals and care centres.
ConnectCareHero raised £1.4 million in March 2023 from six investors, including Alphabet and the American Heart Association.
Its digital activities, virtual classes and culturally relevant programmes were designed to reduce social isolation among older adults.
Human Longevity raised £12 million in April 2023.
The biotechnology company used genomics to support personalised treatment and preventative-care models. The anti-ageing gene-editing market was predicted to reach $64 billion by 2026.
Techstars invested in HandI Health in March 2023 as part of a $1.12 million funding transaction supported by $1 million of debt financing.
HandI Health developed a SaaS platform combining price transparency, insurance and demographic information to support healthcare-purchasing decisions. It recorded a reported revenue multiple of 1.91x and an EBITDA multiple of 42.94x.
Springboard raised Series B2 funding in April 2023.
Its online training platform provided nine-month courses with individual mentoring, focusing on careers including data science, user-experience design and software engineering.
Sono Bello raised approximately £600 million in private equity growth funding in February 2023.
The business provided personalised inpatient aesthetic-surgery services.
Afterschool HQ
Afterschool HQ raised £9 million in March 2023.
Its platform connected young people with after-school and summer learning programmes and enabled parents to find and pay for activities.
Important areas of focus included:
Telemedicine, wearable Healthtech, AI-supported diagnosis, preventative care, adaptive learning and digital education were among the principal developments.
The sector recorded 270 private equity transactions, 170 M&A transactions and 61 venture capital transactions. Activity declined across most subsectors compared with 2022, with managed care being the exception.
Global Healthtech transaction volumes almost halved between 2022 and 2023. Investors were assessing the businesses backed during the earlier period of rapid investment, while differences between buyer and seller valuation expectations affected transactions.
Wearable devices, virtual wards, remote consultations, healthcare applications and administrative automation were being used to monitor patients, reduce missed appointments and allow professionals to spend more time on patient care.
AI was being applied to medical-data analysis, diagnosis, drug development and patient monitoring. AI-assisted mammography demonstrated accuracy comparable with a standard double reading while taking less time.
Demand was being supported by flexible learning, adaptive study tools, digital examination materials and technology that enabled students to follow more personalised learning pathways.
The NHS was projected to face a staffing shortage exceeding 570,000 people by 2036. This increased demand for healthcare education and flexible, technology-supported training.
Healthtech, managed care, Edtech and training attracted venture capital, private equity and accelerator investment. Trade buyers were also active across hospitals, care centres and education software.
Efficient healthcare delivery, preventative medicine, remote monitoring, AI, administrative automation, adaptive learning and healthcare training were important areas of focus.
