Your Primer to Healthcare Mergers and Acquisitions

Defying The Odds: The Healthcare Market Continues To Attract Investment

Feb 16, 2016

by David E. Coit, Jr.

By Tom Schramski, PhD, CM&AA and David E. Coit, Jr., DBA

Volume 3 Issue 4 February 16, 2016

Based on the healthcare market cycles of the last 40 years, including the Great Recession, we have been conditioned to believe the bottom eventually falls out of every sector.  Yet, despite the eroding value of many commodities and world stock markets, healthcare investment, including M+A transactions, remains strong.

The just-released GF Data® M&A Report suggests that private equity healthcare deal activity was robust through 2015 and, in some strata, as vibrant as it’s been for some time.  For example:

  • High EBITDA premiums for Total Enterprise Value (TEV) increased during 2014 in the $10-25 million range (to 6.6x); the $50-100 million range (to 8.0x); and the $100-250 range (to 9.7x).  The $10-25 million TEV multiple is especially noteworthy since this is often the size of healthcare “add-ons” to existing platforms.
  • Healthcare deal activity recorded by GF Data® increased significantly in 2015 for private equity-sponsored transaction.  This data appears representative of the healthcare deal space, where consolidation continues at a brisk pace.

GF Data’s® approach is noteworthy because of the rigor with which their data is collected.  While it doesn’t address the next lower range ($2-10 million TEV where the multiples are often 4-5.5x), it matches closely our own experience in 2015 as well as healthcare deal valuations well into our pipeline for 2016.

Yes, it would be folly to believe there is little risk ahead, but we remain optimistic because of the unique nature of our healthcare marketplace.  While we are bedeviled by unnecessary regulations and old practices, the flip side is an extraordinary opportunity for entrepreneurial innovation.

The ride has just begun.

David E. Coit, Jr.

David E. Coit, Jr. DBA, CVA, CVGA, CM&AA, CBEC

Director, Finance + Valuation/Partner

David is a seasoned commercial and corporate finance professional with over 30 years’ experience. As part of the VERTESS team, he provides clients with valuation, financial analysis, and consulting support. He has completed over 150 business valuations. Most of the valuation work he does at VERTESS is for healthcare companies such as behavioral healthcare, home healthcare, hospice care, substance use disorder treatment providers, physical therapy, physician practices, durable medical equipment companies, outpatient surgical centers, dental offices, and home sleep testing providers.

David holds certifications as a Certified Valuation Analyst (CVA), issued by the National Association of Certified Valuators and Analysts, Certified Value Growth Advisor (CVGA), issued by Corporate Value Metrics, Certified Merger & Acquisition Advisor (CM&AA), issued by the Alliance of Merger & Acquisition Advisors, and Certified Business Exit Consultant (CBEC), issued by Pinnacle Equity Solutions. Moreover, the topic of his doctoral dissertation was business valuation.

David earned a Doctorate in Business Administration from Walden University with a specialization in Corporate Finance (4.0 GPA), an MBA from Keller Graduate School of Management, and a BS in Economics from Northern Illinois University. He is a member of the Golden Key International Honor Society and Delta Mu Delta Honor Society.

Before joining Vertess, David spent approximately 20 years in commercial finance, having worked in senior-level management positions at two Fortune 500 companies. During his commercial finance career, he analyzed the financial condition of thousands of companies and had successfully sold over $2 billion in corporate debt to institutional buyers.

He is a former adjunct professor with 15 years' experience teaching corporate finance, securities analysis, business economics, and business planning to MBA candidates at two nationally recognized universities.

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