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Friday, August 30, 2019

Physician Practice M&A Transactions Still Hot

No Summer Slump for Health-Care Industry Deals

(from Bloomberg Law)

- July saw most deals closed and announced in 2019
- Physician practice sector led month

There has been no summer slowdown in the health-care industry, as dealmakers amped up the number of transactions they announced or closed in July.

The month outstripped each of the prior six with a total of 161 transactions, according to a list of select deals prepared for Bloomberg Law by investment bankers at ECG Management Consultants and Provident Healthcare Partners LLC.

Transactions volume overall bounced back from springtime lows, ending with a seven-month total of 747 deals.

“Low interest rates and favorable macroeconomic conditions” will keep transactions activity booming for the rest of 2019, Hector M. Torres, a principal at ECG in Chicago, told Bloomberg Law.

Red-Hot Physician Practices

The physician practices and services sector led the way in July with 31 announced or closed transactions. The year-to-date total of 113 deals is in line with 2018’s year-to-date total of 106, Torres said.

The pace should accelerate, Gary W. Herschman, a member of Epstein Becker & Green in Newark, N.J., told Bloomberg Law.

Investors mainly focused on eye care and dermatology practices in July, much as they have for about the past 10 years, Herschman said. But two July deals each in orthopedics and gastroenterology support predictions that the number of platforms in these two “hot” sectors will double in 2019, he said.

Radiology, obstetrics-gynecology, and oncology continued to see activity as well, Herschman said.

Private equity is driving many of these deals, Torres said. Large platform companies like Verdi Oncology and Texas Digestive Disease Consultants completed acquisitions in July, he said. Verdi is funded by Pharos Capital Group, and TDDC is backed by Waud Capital Partners.

Private equity groups Beecken Petty O’Keefe & Co. and Potomac Equity Partners formed new platform investments in July, Torres said. Beecken acquired ClareMedica Health Partners, while PEP bought Laser MD MedSpa and SculptMe to form a comprehensive medical spa in the Boston area, he said.

Long-Term Care Not Slowing Down

Long-term care is still a growth sector with 20 deals in July, Herschman said.

Private equity is making significant inroads in this sector, ECG senior manager Aaron T. Newman told Bloomberg Law. CPF Living Communities, a portfolio company of Chicago Pacific Foundation, for example, expanded its national footprint in July by completing three acquisitions in Texas, Arizona, and Pennsylvania, he said.

The inherent real estate value associated with long-term care facilities makes them attractive targets for Real Estate Investment Trusts, Newman added. CareTrust REIT, for example, acquired a 99-bed rehabilitation facility in Idaho for $12.8 million. It now has 213 net-leased health-care properties and three self-operated senior-care facilities in 28 states, he said.
Steady Growth in IT, Hospital Sectors

The health-care information technology sector experienced steady consolidation in July, consistent with its performance throughout 2019 so far, Herschman said. Companies offering engagement and empowerment solutions for patients with chronic health conditions, platforms that make patient navigation easier, and data analytics software were popular targets in July, he said.

Deals In the hospital/health system sector were up slightly over June, ECG’s Nicholas Davis told Bloomberg Law. Virtua Health continued expanding its New Jersey regional market share by closing a deal with Lourdes Health System, he said.

Michigan’s largest health system, Beaumont Health, signed a letter of intent to acquire Summa Health, a four-hospital system in Akron, Ohio, Davis said. Summa will become an operating subsidiary of Beaumont and maintain its own management and board of directors, he said.

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