The effects of digital transformation on the German care market

The most important facts

• The number of people in need of care is growing, and so is the care market.
• Legislation and funding programmes pave the way for the advancement of the digital transformation of the care sector.
• The market for mergers and acquisitions in care is very active in some areas, however we are observing financial strains on care home operators.
• The convergence of care and digital solutions will lead to an increase in M&A transactions

Updated industry snapshot

The German care market in the wake of digital transformation

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The German care market after the COVID-19 pandemic

German population statistics show that the number of people in need of care will continue to rise sharply from five million in 2021 to six million by 2030. This figure not only indicates that the care sector will become larger, but it also conveys an idea of the serious challenges in this sector that requires high numbers of workers. Recruiting nurses from other countries is one answer. However, there are some other obstacles that larger care institutions with their own training facilities can overcome more easily. 

To improve the situation in the care market, Germany has passed new laws to help care providers gain better access to digital services. In addition, the conditions on foreign care workers who want to work in Germany are being eased. Nevertheless, the introduction of electronic patient records (EPR) with the many changes it brings is a good, and not the only, example of the uncertainties faced by market stakeholders. 

In 2023, many nursing home operators are facing financial difficulties. This is attributable to the outbreak of COVID-19, staff shortages and increasing energy prices. The stakeholders that have been able to acquire and secure a high occupancy rate in the recent past are likely to benefit from the current situation and further consolidate their market position. The home care market is somewhat more active in terms of mergers and acquisitions, while transaction activity in the market for critical care in a non-clinical setting has slowed down slightly over the past two years.

The after-effects of COVID-19 as well as higher personnel and energy costs are causing a stressful situation in the nursing market. This is partly reflected in fewer large M&A transactions, but also in the recent insolvencies of well-established nursing home operators. All in all, current investors in the care market will need a long-term perspective to benefit from the current changes.

The digital transformation of the German care market

Digital transformation is marking progress despite the current market turmoil. The new law passed by the German government gives the market fresh impetus. It establishes targeted funding programmes and electronic directives. Last but not least, we are excited to see the rise of digital solutions, following the widespread introduction of electronic patient records and telemedicine solutions.

The global decline in the valuation of tech companies and fewer venture capital investments came as a surprise to the German M&A market in 2022, but are leading to better scrutiny of the business models of M&A targets. The German health system still has to catch up in terms of the variety of digital solutions. However, there are enough digital expansion options to relieve and upgrade the traditional care basis. In our opinion, the convergence of care and the digital world will lead to an increasing number of M&A transactions in the next few years.

Feel free to contact us at any time with questions about M&A transactions, business valuations and business acquisitions.

In addition, we regularly hold virtual discussions on this M&A topic. If you are interested, please contact me by e-mail: alex.refec@de.gt.com.