Plans for the future: activity in Australia’s disability insurance industry is heating up

Data Insight Dealspeak 18 April

Plans for the future: activity in Australia’s disability insurance industry is heating up

By Louise Weihart and

According to Confucius, a famous Chinese philosopher, a man who does not plan long ahead will find trouble at his door. It is a sentiment that is equally relevant to both participants and plan management providers associated with Australia’s government-funded high-growth National Disability Insurance Scheme (NDIS).

The scheme, which was created after the passing of legislation in 2013 and became fully operational in 2020, funds costs associated with disability. It is expected to spend around AUD 34bn (USD 22.8bn) in 2022-23 before soaring to AUD 89bn (USD 59.6bn) in 2031-32. NDIS providers’ market size measured by revenue is estimated at AUD 37.5bn (USD 25.1bn) for 2023.

Pioneers are increasingly validating the space through M&A, as they look to create capacity, scale, and build footholds in a sector primed for further consolidation, with Dealogic data showing interest steadily intensifying.

There have been three deals already this year, following one each in 2019 and 2020, and two apiece in 2021 and 2022, according to Dealogic.

Corporates come calling

Private equity (PE) investor IFM was the frontrunner, securing a significant majority stake in My Plan Manager in August 2019, and it followed this up with a bolt-on of National Disability Partners in October 2022.

Large corporates have been circling and swooping for targets ever since.

In 2020, McMillan Shakespeare [ASX:MMS] shelled out AUD 8m (USD 5.4m) to acquire joint-venture (JV) partner Disability Services Australia’s 25% interest in Plan Partners, which the two companies had launched in July 2016.

In December 2021, APM Human Services [ASX:NHF] snapped up MyIntegra, along with other services businesses, for a total of AUD 101.5m (USD 67.9m), following this up a few months later with its July 2021 Plan Tracker purchase.

nib [ASX:NHF] entered the fray last November with an AUD 158m (USD 105.8m) capital raise and acquisition of Maple Plan. In February, the company acquired Peak Plan Management and Connect Plan Management. In March, nib announced its intention to move for All Disability Plan Management, while at the same time telling the market to expect further transactions.

Up for grabs

Some PE firms without NDIS platforms are keen to enter the space, but they may need to find an angle and a business with enough scale to grow, given there are already well-capitalised players in the market and with the sector being highly fragmented.

As of 2Q23, there were more than 10,000 active providers and only the top five players have more than 3% market share, with those below the top 20 being very small.

Within the top 20, players include Leap In and Instacare, both founded in 2017, and not-for-profit registered charity Moira, with other providers including Bright Plan Management and social enterprise Australian Integrated Care Services (AICS).

There is also an emerging band of digital players such as T-Shirt Ventures, which has said it will consider further capital raises as it works towards profitability, and Kindship, which has raised more than AUD 1m (USD 670,000) to build its NDIS budget management tool.

With IFM Investors thought to be ready to offload its NDIS investment, it appears the asset could be hotly contested, not only by PE players looking to get a foothold, but corporates positioning to build the dominant player in the space. Already, nib and McMillan Shakespeare have been mooted as potential buyers by local media.

The time for putting future plans into action is fast approaching.