Alvarez & Marsal expands into healthcare to capitalise on region's transformation push

Former Cleveland Clinic Abu Dhabi executive Ray Berry to lead healthcare practice

On the road past the King Abdullah Financial District in Riyadh. Saudi Arabia’s Crown Prince Mohammad Bin Salaman last year said the kingdom plans to privatise more than 20 companies in 2019. Reuters

Alvarez & Marsal is expanding its healthcare practice in the Arabian Gulf as the global consultancy looks to capitalise on opportunities arising from regional governments’ push to open up the healthcare sector to private investments and partnerships.

"Government [healthcare] providers have been forced to become more efficient, especially in Saudi and UAE, driven by cost issues," Asad Ahmed, a managing director at Alvarez & Marsal in Dubai, told The National. "There's a lot of transformation happening at the government level within the health sector and that's the expertise we have [at the international level] and we wanted to bring that to the region and combine it with the local knowledge."

Saudi Arabia and the UAE are, like their GCC peers, implementing major economic overhaul programmes in the wake of a three-year oil price slump that saw the crude prices fall from a mid-2014 peak of $115 per barrel to less than $30 per barrel in the first quarter of 2016. The crude benchmark has since clawed back, hovering around $70 per barrel, however, both Gulf states - the two biggest Arab economies - are pushing ahead with their economic transformation agendas.

Saudi Arabia, which is the biggest healthcare market in the GCC, is encouraging private sector involvement in its healthcare industry as part of its Vision 2030 to help meet rising demand for medical services due to an expanding population, increased treatment costs and rising insurance coverage.

Saudi Arabia’s Crown Prince Mohammad Bin Salaman last year said the kingdom plans to privatise more than 20 companies in 2019. Some of the companies will be health and education sector state-controlled assets, Economy Minister Mohammad Al Tuwaijri said in Riyadh in October.

“Vision 2030 is a driver in many areas [of the economy], it is certainly on top of our agenda,” Mr Ahmed said. “Our view of expanding the practice is that obviously we wanted to be a part of it.”

GCC expenditure on health care is forecast to rise to $104.6 billion (Dh384.1bn) in 2022 from $76.1bn in 2017, rising at a compound annual growth rate of 6.6 per cent, Dubai investment bank Alpen Capital’s said in a report last year.

Alvarez & Marsal is more known for its financial and restructuring practice in the region. But as investors are looking at both the UAE and Saudi markets for investment opportunities in healthcare and education, the firm is expanding into those sectors.

Dubai-listed Amanat, which already holds stakes in healthcare assets in both countries, is looking for more investment opportunities. Investcorp, the Bahrain-headquartered alternative investment manager, expects its GCC portfolio of $1bn to rise to $1.5bn to $2bn in the next five years as it eyes acquisitions in social infrastructure including healthcare and education.

The London-listed UAE healthcare company NMC this year also finalised a joint venture agreement with Saudi Arabia’s General Organization for Social Insurance that includes up to 6bn Suadi riyals of investments in the kingdom over a five-year period.

Within Saudi Arabia, the annual spend on healthcare came to about Dh162bn, which is split into patient spending Dh18bn, government shedding 124bn and private healthcare insurer Dh20bn, noted Ray Berry, a former Cleveland Clinic Abu Dhabi executive who has joined Alvarez & Marsal in Dubai as a director to lead the healthcare practice.

Already, the firm is handling several projects from large governmental clients, private equity firms and healthcare operators and investors. Alvarez & Marsal, which has a big healthcare practice in developed markets such as the US, plans to offer services including advice on partnership agreements, revenue cycle management and transformations, organisational restructuring and growth strategies, he said.

“On the private equity, it’s a lot of partnership structuring, and on the government side most mandates are driven to implement their transformation strategies,” Mr Berry noted.

Alvarez & Marsal is also looking to expand its education and real estate practices and is in the process of hiring senior level staff, Mr Ahmed said.