Your Primer to Healthcare Mergers and Acquisitions

Category: Healthcare Sectors

Healthcare Sectors, Market Trends
Market Pulse: Behavioral Health & I/DD

In this column, I'm going to share my thoughts on today's behavioral health and intellectual and developmental disability (I/DD) markets. I'll speak to the macro environment because those issues are impacting the decisions of buyers and lenders. In turn, these issues impact the values buyers are willing to pay for your company. I’ll also address how you, as an owner in this space, can use this information for your own planning purposes — that is, how to do what’s best for you.

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Healthcare Sectors, Market Trends
Healthcare Technology: Update on Growth and Investments

In September, VERTESS Managing Directors, joined by members of the business development team, attended three national conferences: Cape Cod Symposium on Addictive Disorders, The National Association for Specialty Pharmacy Annual Meeting, and The Home Care Association of America Annual Leadership Conference. Dominating the tradeshow floors were exhibitors in the healthcare technology space. We estimated that these companies accounted for 40-60% of the exhibitors — a common thread intersecting the three different verticals represented at the meetings.

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Healthcare Sectors, Market Trends
SUD Buyer Study: Key Takeaways for Healthcare Business Owners

The information covered in the following column is derived from two sources. First, VERTESS recently conducted a survey of more than 20 buyers of substance use disorder (SUD) treatment providers on a variety of topics, including acquisition strategy and market trends. Second, I engaged in extensive discussions with fellow VERTESS team members who collectively are heavily involved in the private capital markets and witness the cycles in the verticals we represent.

My intentions in this column are to articulate broad concepts in current trends and developments within the broader healthcare M+A markets. While I am writing for owners of all healthcare businesses, there is a special emphasis on owners of SUD treatment businesses since the survey conducted was with SUD buyers and SUD is an area in which I specialize. SalientValue also has articles on general recommendations for healthcare business owners and vertical/segment specific articles outside of SUD.

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Healthcare Sectors, Market Trends
Mark Cuban Cost Plus Drug Company: How Will it Affect Retail Pharmacy?

About six months ago, the Cost Plus Drug Company, entrepreneur Mark Cuban's online pharmacy, officially launched. As of late, the pharmacy is receiving significant media attention, including a study published in the journal Annals of Internal Medicine which showed Medicare could have saved nearly $4 billion in 2020 by purchasing generic drugs at the same prices offered by Cost Plus. Cuban took to Twitter to share the results with and tag President Joe Biden and other elected officials.

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Healthcare Sectors, Market Trends
When Is It Time for an ASC To Consider a Strategic Partner?

The ambulatory surgery center (ASC) market is changing rapidly. Surviving in the current market is no longer as simple as meeting the needs of the community you serve. Competition among ASCs is now measured through a litmus test of strength based on collateral along with quality standing. These are now the deciding factors that determine winners and losers in the market.

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Healthcare Sectors, Market Trends
How Artificial Intelligence is Reshaping Healthcare: 10 Key Takeaways

The pandemic brought rapid and tremendous disruption to the healthcare industry, forcing the healthcare ecosystem to account for new pressures and challenges. The disruption also compelled many companies to halt or slow their short- and long-term plans and evaluate what they could do better and how they could achieve the improvements needed to support a struggling healthcare system. 

As we transition out of the pandemic or continue to learn how to live with COVID-19, now is the time for healthcare providers and medical device companies to shift from responding to the pandemic to recovering from it. Organizations and companies that understand this evolving demand curve will need to substantially change the way they plan strategically, and that includes incorporating virtual components or expanding their usage of these solutions. What is apparent is that the recovery from the pandemic will be partly — if not heavily — fueled by the development and integration of new technologies, particularly those powered by artificial intelligence (AI) and machine learning.

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Exit Planning, Healthcare Sectors
Preparing to Sell Your DME Company: 7 Steps to Take Before Proceeding

When the time comes for you to sell your durable medical equipment (DME) company, there will be a lot of work required to go from putting the company on the market to completing the transaction. But if you want that sales process to go smoothly, there's a good deal of work you'll want to complete before you start.

Here are seven of the key steps you should take that will better help ensure your company sells for a fair price and to the right buyer.

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Healthcare Sectors, Market Trends
Reflections on Healthcare M&A in 2021 and Expectations for 2022

Every January, as we begin conversations with healthcare business owners who are considering the sale of their companies, we are often asked about the previous year's market and what predictions we can offer for the new year.  2021 offered some continuing challenges due to the ongoing global pandemic, but there was still significant activity in healthcare M&A.  While 2022 is still just days old, VERTESS is keenly aware of developing trends that we believe will continue throughout the year. As each VERTESS team member has a long history in specific healthcare sectors, we are reviewing the previous year for each of those sectors as well as some projections for 2022. 

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Healthcare Sectors, Market Trends
SUD Treatment Industry Trends and Developments

We recently heard of an investor bidding more than 20x forward-EBITDA on a residential substance use disorder (SUD) treatment center with a 30-day due diligence period. This caught our attention. More poignant was that this bidder lost the deal to another investor.

It is no new news that SUD treatment providers across multiple segments are currently worth more than they ever have been historically. When Pitchbook released its 2021 Q3 report on the behavioral health vertical, we learned that in only nine months, more deals and more deal value were transacted than the previous best year on record in 2019. Some experts anticipate 2021 to finish at least 40% higher in both metrics than 2019, and SUD treatment — residential treatment, in particular — makes up a substantial portion of that activity, due to extraordinary utilization of benefits and new product designs from insurance carriers that promote mental health reimbursements such as Anthem’s “Behavioral Health Advantage” plan that is expected to launch in 2022.

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Healthcare Sectors, Valuation
Understanding and Valuing a Freestanding Emergency Department

Freestanding emergency departments (FSED) have seen substantial growth over the past two decades. Research published in the Western Journal of Emergency Medicine states that the National Emergency Department Inventory determined in 2001 that about 1% of all emergency departments (ED) in the United States were FSEDs. Fast forward to 2016 and the Medicare Payment Advisory Commission reported that FSEDs had accounted for 11% of all EDs nationwide. Grand View Research is projecting that the U.S. FSED market size, which was valued at around $3 billion in 2019, is expected to expand at a compound annual growth rate (CAGR) of around 5% from 2020-2027.

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Exit Planning, Healthcare Sectors
Medtrade Edition - Selling Your DME Business: How to Time the Market for an Exit

Is it possible for the owner of a durable medical equipment (DME) company to time the market to maximize an exit? That depends. Successful transactions come together when the following three conditions are in sync:
1. The business is ready for external scrutiny.
2. The owner is personally ready for a transition.
3. The timing of the capital market (macro) and the DME market (micro) are favorable.

The seller and a merger and acquisition (M&A) intermediary can influence control over the first two of these conditions. The third condition, on the other hand, requires a bit of luck. Let's take a closer look at these conditions and their importance in a successful transaction.

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Exit Planning, Healthcare Sectors
The Story of My Sale: Spero Recovery

I recently joined VERTESS as a managing director. I'll be providing merger and acquisition (M+A) and consulting services primarily to the behavioral health and substance use disorder (SUD) treatment markets. Like many of my new colleagues, I previously owned and operated a company in the space I will be working in for VERTESS. But that's not all: I also have firsthand, personal experience with substance misuse.

In this column, I'll share a little about this journey with you, how it motivated me to open my company, and several of the key lessons I learned from the sales process.

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