MERGERS & ACQUISITIONS • CAPITAL RAISES • FINANCIAL & STRATEGIC ADVISORY 1 HEALTHCARE SERVICES SEGMENT COVERAGE TRENDS & COMMENTARY HEALTHCARE SERVICES MARKET UPDATE –F ALL 2017 60 % of the Time, It Works Every Time The Affordable Care Act has occupied centerstage of the political theater for so long that even its once staunchest critics are growing battle-weary (see Legislative Update). So while the periphery of the Act may eventually give way in subsequent legislative sessions, most constituents agree that the core of the platform, namely Value Based Care, has enough in it (60% or so) that “works”. As a result, the prevailing investment themes of 2016 around increasing quality of care, driving down costs, engaging patients, and managing populations (all the better if achieved via robust data analytics) have remained intact throughout 2017. An Old, Old Wooden Ship Used During the Civil War Era One undeniable consequence of the ACA is the higher payment burden placed on the patient. Whether due to higher deductibles, higher co-pays, or greater scrutiny by commercial payors on out-of-network services, net patient revenue has been trending flat or slightly down for some time now. Providers and their outsourced servicers alike are thus embracing revenue stream Diversity (properly defined) like never before as a means to drive growth and margin expansion. From hospitals acquiring post-acute services businesses to diagnostic labs acquiring CROs to payor services companies buying ASCs, the race is on to control the full care continuum in order to measure performance and demonstrate quality outcomes. Boy, That Escalated Quickly Global demographic and regulatory tailwinds continue to drive robust investment and consolidation in the pharma services market with outlier valuation multiples seemingly becoming the new normal. Following Quintiles merger with IMS Health in 2016 and numerous private CRO recapitalizations in early 2017, the 3 rd quarter alone saw four $1BN+ transactions hit in rapid succession (see next page). Keep your head on a swivel and expect more of the same as public and private market dry powder looks for a home in 2018. LEGISLATIVE UPDATE • American Health Care Act of 2017 (AHCA) May 2017: Republican Bill (H.R. 1628) to enact partial repeal of ACA / Obamacare passes the House with a vote of 217-213 • Better Care Reconciliation Act (BCRA) July 2017: Senate version of the AHCA fails to pass 3 times – the original bill plus two save attempts via compromise amendments • Graham-Cassidy Amendment to BCRA Sep 2017: Senate attempt to revive the failed push in July for at least a partial and diluted repeal of the ACA. Ultimately not brought to the floor for a vote due to a lack of Republican support. Appears, therefore, that the ACA will remain intact at least through the calendar year P ROVIDER S ERVICES • Revenue Cycle Mgmt. • Equipment Mgmt. • Staffing / Recruiting • Diagnostic Labs • Emergency Transport P HARMA S ERVICES • Contract Research • Contract Packaging • Staffing / Recruiting • Clinical Trial Supply • Distribution & Logistics P RACTICE MANAGEMENT • Emergency Medicine • Anesthesiology • Radiology • Ophthalmology • Dermatology OUTPATIENT C ARE • Surgery Centers • Rehabilitation • Behavioral Health • Diagnostic Imaging • Onsite Health This is the first issue of a new Healthcare Services newsletter which will be published biannually, focusing on trends in our coverage segments as informed by M&A / capital markets activity and legislative developments. We are excited to announce that we have grown to 44 professionals across our 4 offices in the U.S. and have completed 72 transactions since 2014. We recently won the Boutique Investment Bank of the Year award in the U.S. by the M&A Advisor.
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CAPITAL AISES • FINANCIAL TRATEGIC ADVISORY ......Company Name 8/31/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA Growth Average Charles River Laboratories International,
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The Affordable Care Act has occupied centerstage of the political theaterfor so long that even its once staunchest critics are growing battle-weary(see Legislative Update). So while the periphery of the Act may eventuallygive way in subsequent legislative sessions, most constituents agree thatthe core of the platform, namely Value Based Care, has enough in it (60%or so) that “works”. As a result, the prevailing investment themes of 2016around increasing quality of care, driving down costs, engaging patients,and managing populations (all the better if achieved via robust dataanalytics) have remained intact throughout 2017.
An Old, Old Wooden Ship Used During the Civil War Era
One undeniable consequence of the ACA is the higher payment burdenplaced on the patient. Whether due to higher deductibles, higher co-pays,or greater scrutiny by commercial payors on out-of-network services, netpatient revenue has been trending flat or slightly down for some time now.Providers and their outsourced servicers alike are thus embracing revenuestream Diversity (properly defined) like never before as a means to drivegrowth and margin expansion. From hospitals acquiring post-acuteservices businesses to diagnostic labs acquiring CROs to payor servicescompanies buying ASCs, the race is on to control the full care continuum inorder to measure performance and demonstrate quality outcomes.
Boy, That Escalated Quickly
Global demographic and regulatory tailwinds continue to drive robustinvestment and consolidation in the pharma services market with outliervaluation multiples seemingly becoming the new normal. FollowingQuintiles merger with IMS Health in 2016 and numerous private CROrecapitalizations in early 2017, the 3rd quarter alone saw four $1BN+transactions hit in rapid succession (see next page). Keep your head on aswivel and expect more of the same as public and private market drypowder looks for a home in 2018.
LEGISLATIVE UPDATE
• American Health Care Act of 2017 (AHCA)
May 2017: Republican Bill (H.R. 1628) toenact partial repeal of ACA / Obamacarepasses the House with a vote of 217-213
• Better Care Reconciliation Act (BCRA)
July 2017: Senate version of the AHCA fails topass 3 times – the original bill plus two saveattempts via compromise amendments
• Graham-Cassidy Amendment to BCRA
Sep 2017: Senate attempt to revive the failedpush in July for at least a partial and dilutedrepeal of the ACA. Ultimately not brought tothe floor for a vote due to a lack ofRepublican support. Appears, therefore,that the ACA will remain intact at leastthrough the calendar year
PROVIDER
S ERVICES
• Revenue Cycle Mgmt.
• Equipment Mgmt.
• Staffing / Recruiting
• Diagnostic Labs
• Emergency Transport
PHARMA
S ERVICES
• Contract Research
• Contract Packaging
• Staffing / Recruiting
• Clinical Trial Supply
• Distribution & Logistics
PRACTICE
MANAGEMENT
• Emergency Medicine
• Anesthesiology
• Radiology
• Ophthalmology
• Dermatology
OUTPATIENT
C ARE
• Surgery Centers
• Rehabilitation
• Behavioral Health
• Diagnostic Imaging
• Onsite Health
This is the first issue of a new HealthcareServices newsletter which will be publishedbiannually, focusing on trends in our coveragesegments as informed by M&A / capitalmarkets activity and legislative developments.
We are excited to announce that we havegrown to 44 professionals across our 4 officesin the U.S. and have completed 72 transactionssince 2014. We recently won the BoutiqueInvestment Bank of the Year award in the U.S.by the M&A Advisor.
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NOTABLE HEALTHCARE SERVICES TRANSACTIONS – 2017
CHILDS HEALTHCARE SERVICES TRANSACTIONS – 2017
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EV/EBITDA
HEALTHCARE SERVICES M&A ACTIVITY AND TRENDS
CHILDS Advisory Partners
EV/EBITDA
M&A VALUATIONS
Sources: Capital IQ and CHILDS proprietary database
Sell-side advisor to NLS Animal Health on its sale to Henry Schein▪ National distributor of veterinary medicine pharmaceuticals
Sell-side advisor to Almedica on its sale to Aptuit▪ Global clinical trial packaging and logistics services
Sell-side advisor to Nursefinders on its recapitalization with Goldman Sachs UIG▪ Travel and per diem healthcare staffing services to US hospitals
Sell-side advisor to Accountable Healthcare Staffing on its recapitalization with Mitsui & Co.▪ Healthcare staffing services to hospitals and other outpatient facilities
Sell-side advisor to Gwinnett Emergency Specialists on its sale to Envision Healthcare▪ Emergency medicine practice serving 150,000 annual visits in greater Atlanta market
Sell-side advisor to Trinity Healthcare Staffing Group on its sale to Travel Nurse Across America▪ Travel nurse staffing and workforce management services
Sell-side advisor to Travel Nurse Across America on its recapitalization with Gridiron Capital▪ Travel nurse staffing services, including training & testing, to US hospitals
Sell-side advisor to HMS Consulting Group on its sale to HCTec▪ Workforce management solutions for the healthcare industry
Sell-side advisor to Advanced Medical on its recapitalization with Clearview Capital▪ Occupational, physical, and speech therapy staffing solutions
Sell-side advisor to aspen advisors on its sale to The Chartis Group▪ HCIT consulting, implementation and optimization services
Sell-side advisor to InterMed on its recapitalization with Wafra Partners▪ Medical equipment management services to US hospitals
Sell-side advisor to McKinnis on its sale to Navigant▪ Revenue cycle management consulting services to US healthcare organizations
Sell-side advisor to ScribeAmerica on its recapitalization with Chicago Growth Partners▪ Medical scribe education, training, and managed services to hospitals
Sell-side advisor to PharmaLogics Recruiting on its recapitalization with Webster Capital▪ Recruitment Process Outsourced services to global life sciences market
Sell-side advisor to locum leaders on its sale to Onward Healthcare▪ Physician staffing services to US healthcare systems and practice management organizations
Sell-side advisor to Sharp Packaging on its sale to UDG Healthcare▪ Outsourced pharmaceutical primary and secondary packaging services
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CHILDS Advisory Partners
FIRM OVERVIEW
• Former healthcare investment banker with UBS and Piper Jaffray
• 15 years of investment banking experience
• JD from University of Georgia School of Law and MBA from Columbia Business School
Ross DeDeynManaging Director
• Founded and led Robinson-Humphrey’s Business Services practice starting in 1992
• Executed over 100 Professional Services transactions
• MBA from Darden School of Business at University of Virginia
Cooper MillsManaging Director
• Former Managing Director for Blackstone Advisory Partners, the M&A advisory arm of Blackstone
• 20 years of investment banking experience, executing $40B+ of M&A transactions
• MBA, Harvard Business School
Jason WallaceManaging Director
• Former executive at MPS Group and Volt Information Sciences
• Sourced and executed over 50 Professional Services transactions
• Focuses on corporate and business development strategy
Dave PhillipsManaging Director
• Prior corporate finance and restructuring experience with FTI Consulting
• Over 9 years of investment banking experience
• BS in Economics from Vanderbilt University, summa cum laude
Steve DyottVice President
• Prior M&A experience with Piper Jaffray
• JD from University of Georgia School of Law and MBA from Terry College of Business at the University of Georgia
Ryan SugrueVice President
• Prior M&A experience with FMI Capital Advisors
• Over 5 years of investment banking experience
• BS in Business Administration from Washington & Lee University
Robert WombleAssociate
• Prior investment banking and capital markets experience with Wells Fargo Securities and Goldman Sachs
• BA from Duke University
Kenny OsakweAssociate
3438 Peachtree Road, Suite 1400 Phipps Tower | Atlanta, GA 30326 | 404.751.3000 | www.childsadvisorypartners.com
HEALTHCARE SERVICES TEAM
QUICK FACTS ACCOLADES
• 44 professionals across four offices in the U.S. with headquarters in Atlanta
• 72 Closed Transactions Since Beginning of 2014
• Over 450 Middle Market Transactions Completed (EV less than $1B)
• 60% financial / 40% strategic buyer mix
• Market-leading close rate
• 2016 US Boutique Investment Bank of the Year Winner
• 2014 Cross-Border Transaction of the Year Finalist
• 2014 Professional Services Transaction of the Year Finalist