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MERGERS & ACQUISITIONS • CAPITAL RAISES • FINANCIAL & STRATEGIC ADVISORY
1
HEALTHCARE SERVICES SEGMENT COVERAGE
TRENDS & COMMENTARY
HEALTHCARE SERVICES MARKET UPDATE – FALL 2017
60% of the Time, It Works Every Time
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.
2
NOTABLE HEALTHCARE SERVICES TRANSACTIONS – 2017
CHILDS HEALTHCARE SERVICES TRANSACTIONS – 2017
3
EV/EBITDA
HEALTHCARE SERVICES M&A ACTIVITY AND TRENDS
CHILDS Advisory Partners
EV/EBITDA
M&A VALUATIONS
Sources: Capital IQ and CHILDS proprietary database
QUARTERLY M&A DEAL VOLUME
PUBLIC MARKET VALUATIONS
136
167
227 208 211 219 209
197 208
223
256 262
194 183 174
195 178
149
-
50
100
150
200
250
300
Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017
Dea
l V
olu
me
9.1x
12.7x
15.7x
13.8x
15.7x
–
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
2013 2014 2015 2016 2017 YTD
13.1x 12.3x
8.1x
13.4x
12.0x 12.3x
7.8x
14.8x
12.7x 13.1x
8.0x
15.3x
13.0x 13.1x
8.2x
15.8x
–
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
Outpatient Care Provider Services Hospitals Pharma Services
Q3-2016 Q4-2016 Q1-2017 Q2-2017
PUBLIC MARKET EV/EBITDA INDEX
PUBLIC MARKET INDEXED STOCK PERFORMANCE
4
CHILDS Advisory Partners
HEALTHCARE PUBLIC TRADING STATISTICS
Source: Capital IQ
OUTPATIENT CARE
PROVIDER SERVICES
HOSPITALS
PHARMA SERVICES
Market Data Operating Statistics EV as a Multiple of: Growth
Stock Price LTM LTM FY2019 16 - '17
Company Name 8/31/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA GrowthAverage
Envision Healthcare Corporation $52.41 70.1% $6,250.6 $13,007.6 $6,038.4 $982.6 16.3% 2.15x 13.0x 1.38x 10.5x 118.0% 77.6%
MEDNAX, Inc. 44.85 62.2% 4,154.0 5,875.6 3,337.3 628.4 18.8% 1.76x 9.3x 1.61x 9.6x 7.0% 13.5%
Laboratory Corporation of America Holdings 156.87 95.5% 15,969.4 21,813.3 9,666.5 1,858.8 19.2% 2.26x 11.7x 1.96x 9.7x 7.3% 18.2%
Quest Diagnostics Incorporated 108.35 95.9% 14,779.5 18,395.5 7,588.0 1,444.0 19.0% 2.42x 12.4x 2.07x 10.0x 2.5% 1.8%
Healthcare Services Group, Inc. 51.20 94.3% 3,747.1 3,686.1 1,666.7 129.8 7.8% 2.21x 28.4x 1.91x 23.2x 18.5% 10.5%
PharMerica Corporation 29.40 100.0% 915.0 1,334.4 2,205.8 133.0 6.0% 0.60x 10.0x 0.51x 8.5x 14.4% 7.2%
RadNet, Inc. 10.25 95.1% 484.5 1,107.5 908.6 118.3 13.0% 1.22x 8.7x 1.20x 7.6x 4.0% 9.0%
Mean 87.6% $4,487.3 $756.4 14.3% 1.80x 13.4x 1.52x 11.3x 24.5% 19.7%
Median 95.1% $3,337.3 $628.4 16.3% 2.15x 11.7x 1.61x 9.7x 7.3% 10.5%
% of 52
Week HighMarket Cap.
Enterprise
Value
3 Year
Rev CAGR
Market Data Operating Statistics EV as a Multiple of: Growth
Stock Price LTM LTM FY2019 16 - '17
Company Name 8/31/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA Growth
Average
Charles River Laboratories International, Inc. $108.80 100.0% $5,178.2 $6,200.0 $1,807.4 $435.9 24.1% 3.43x 13.9x 3.15x 12.8x 9.8% 13.9%
Catalent, Inc. 41.29 99.7% 5,163.3 6,936.1 2,075.4 407.5 19.6% 3.34x 17.0x 3.19x 14.4x 15.1% 4.3%
Cardinal Health, Inc. 67.46 79.5% 21,348.0 25,023.0 129,976.0 3,069.0 2.4% 0.19x 8.2x 0.18x 7.5x 4.3% 12.6%
ICON Public Limited Company 113.39 99.2% 6,127.8 6,161.5 1,718.3 393.6 22.9% 3.59x 15.7x 3.31x 14.2x 5.0% 6.8%
PRA Health Sciences, Inc. 77.40 95.6% 4,849.2 5,574.6 1,698.5 250.9 14.8% 3.28x 22.2x 2.51x 13.2x 19.3% 15.2%
Quintiles IMS Holdings, Inc. 96.03 96.1% 20,793.1 29,049.1 6,969.0 1,507.0 21.6% 4.17x 19.3x 3.37x 13.2x 49.4% 20.6%
Thermo Fisher Scientific Inc. 187.14 99.8% 74,894.8 91,179.8 19,199.1 4,812.1 25.1% 4.75x 18.9x 4.11x 15.9x 0.0% 8.9%
Mean 95.7% $23,349.1 $1,553.7 18.6% 3.25x 16.5x 2.83x 13.0x 14.7% 11.8%
Median 99.2% $2,075.4 $435.9 21.6% 3.43x 17.0x 3.19x 13.2x 9.8% 12.6%
% of 52
Week HighMarket Cap.
Enterprise
Value
3 Year
Rev CAGR
Market Data Operating Statistics EV as a Multiple of: Growth
Stock Price LTM LTM FY2019 16 - '17
Company Name 8/31/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA GrowthAverage
U.S. Physical Therapy, Inc. $59.90 76.8% $753.6 $905.8 $377.2 $60.4 16.0% 2.40x 15.0x 2.18x 14.6x 16.2% 10.7%
HealthSouth Corporation 45.75 92.0% 4,517.1 7,544.7 3,773.4 817.1 21.7% 2.00x 9.1x 1.81x 8.8x 6.4% 17.9%
Amedisys, Inc. 52.24 79.3% 1,769.0 1,802.1 1,454.9 105.7 7.3% 1.24x 15.9x 1.15x 11.4x 6.0% 6.9%
LHC Group, Inc. 65.25 94.1% 1,192.9 1,312.5 961.6 92.0 9.6% 1.36x 14.3x 1.25x 13.1x 14.5% 12.9%
Surgery Partners, Inc. 9.75 40.5% 475.9 2,729.6 1,135.0 231.4 20.4% 2.40x 11.5x 1.53x 9.6x 17.2% 0.0%
DaVita Inc. 58.56 83.5% 11,196.7 20,563.7 15,014.2 2,448.3 16.3% 1.37x 8.3x 1.32x 8.2x 3.5% 7.0%
Acadia Healthcare Company, Inc. 46.94 86.4% 4,125.1 7,338.6 2,832.6 574.6 20.3% 2.59x 12.8x 2.39x 10.7x 1.8% 53.1%
Mean 78.9% $3,649.8 $618.5 15.9% 1.91x 12.4x 1.66x 10.9x 9.4% 15.5%
Median 83.5% $1,454.9 $231.4 16.3% 2.00x 12.8x 1.53x 10.7x 6.4% 10.7%
% of 52
Week HighMarket Cap.
Enterprise
Value
3 Year
Rev CAGR
Market Data Operating Statistics EV as a Multiple of: Growth
Stock Price LTM LTM FY2019 16 - '17
Company Name 8/31/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA GrowthAverage
HCA Healthcare, Inc. $78.66 86.4% $28,415.9 $61,040.9 $42,267.0 $8,203.0 19.4% 1.44x 7.4x 1.34x 7.0x 4.7% 6.1%
LifePoint Health, Inc. 57.95 81.7% 2,324.7 5,264.0 6,415.9 760.4 11.9% 0.82x 6.9x 0.80x 6.4x 1.1% 18.0%
Tenet Healthcare Corp. 17.17 69.1% 1,731.1 18,874.1 19,324.0 2,074.0 10.7% 0.98x 8.5x 0.98x 7.5x (2.3%) 10.7%
Universal Health Services, Inc. 108.13 83.3% 10,343.8 14,464.3 10,110.8 1,711.0 16.9% 1.43x 8.5x 1.35x 8.0x 7.6% 9.9%
Community Health Systems, Inc. 7.64 57.5% 855.2 15,518.2 17,478.0 1,780.0 10.2% 0.89x 8.6x 1.06x 8.5x (13.0%) 4.5%
Kindred Healthcare, Inc. 8.10 68.1% 704.9 4,027.4 7,081.4 470.6 6.6% 0.57x 8.6x 0.65x 4.9x (15.9%) 13.4%
Mean 74.3% $17,112.8 $2,499.8 12.6% 1.02x 8.1x 1.03x 7.0x (3.0%) 10.4%
Median 75.4% $13,794.4 $1,745.5 11.3% 0.93x 8.5x 1.02x 7.2x (0.6%) 10.3%
% of 52
Week HighMarket Cap.
Enterprise
Value
3 Year
Rev CAGR
5
CHILDS Advisory Partners
EXTENSIVE HEALTHCARE SERVICES EXPERIENCE
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
6
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
• 2013 Strategic Acquisition of the Year Winner
CORE COVERAGE SERVICES
Human Capital
B U S I N E S S
S E R V I CE SH E A L THCA R E T E CHN O L O G Y
Industrial Services
Services
Technology
Professional Svcs
Software
MERGERS & ACQUISITIONS
CAPITAL
RAISES
MERGERS & ACQUISITIONS
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