On this episode of The Banker's Corner, Kyle Brown, Managing Director at Brown Gibbons Lang & Company joins McGuireWoods' Geoff Cockrell to discuss the latest developments in healthcare private equity investing.

With the current deal market offering lower valuations, companies are looking at internal improvements, such as operations and platform infrastructure, as well as mergers and organic growth strategies. Kyle discusses how diversification, platform infrastructure, and a true dual-pronged growth strategy are key drivers of value regardless of the sub-sector.

“Sure, buy-and-build all day. You have that integration strategy in spades, great. But I've seen, and not because of the debt financing markets, but really since COVID, folks are putting a premium on de novo growth strategies,” Kyle says. 

Kyle and Geoff also discuss two subsectors that they predict will have increased investor activity in 2023: orthopedics and pain management.  Both sectors have unique traits that add value to investors and make them ideal for investment activity. 

Name: Kyle Brown

What he does: Kyle is the Managing Director at Brown Gibbons Lang & Company. He is a senior member of BGL’s Healthcare & Life Sciences team, focusing on Healthcare Provider Services. 

Organization: Brown Gibbons Lang & Company

Connect: LinkedIn

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

On this episode of The Banker's Corner, McGuireWoods' Geoff Cockrell invites Raj Kothari, Managing Director at Cascade Partners, to discuss the current challenges of the healthcare investing market.

An uncertain market and disagreements on valuations have created an interesting start to 2023, which saw a decrease in transactions in the first quarter. For those looking to make larger healthcare sales, the general consensus seems to be  to wait until Q2 or Q3 and see if market conditions improve.

Raj recognizes that buyers are being more thoughtful and cautious when considering a deal. However, the lower and middle market valuations are holding up. 

“If you’re an investor, you're looking for long-term cyclical trends, and all the long-term cyclical trends say that [healthcare-related services] are going to work well,” Raj says on why he chooses to play in the healthcare sector. “If you've got a good service or technology that lowers costs or improves efficiency, and does anything to help, it's going to get more and more traction.”

Name: Rajesh Kothari

What he does: Raj is the founder and managing director of Cascade Partners where he leads divestitures, recapitalizations, acquisitions, and other strategic transactions for clients in the healthcare, industrials, business services, and technology sectors. He has also co-managed multiple private equity funds and dozens of early-stage investments to buyout.

Organization: Cascade Partners

Connect: LinkedIn

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

With higher interest rates causing anxiety throughout much of the first quarter of 2023, McGuireWoods' Geoff Cockrell invites David Baker, Managing Director at FTI Consulting Group, to share his view of the market and how it’s impacting sellers in the M&A space. 

Healthcare as an industry is more resilient in a down economy, David explains, as demand is less likely to be impacted by economic factors. This resilience attracts investors looking to avoid the challenges present in other sectors. 

“I think what attracts a lot of investors to the segment is how steady it is,” says David. “Healthcare hasn't had the highs and lows that many other sectors have gotten over the years.” 

The healthcare economy needs efficiency to close the current gap between demand and supply, and investors who find these solutions will emerge as winners. With interest rates on the rise, David provides insights into how this is impacting overall pricing and deal structures, along with what buyers and sellers need to be considering.

Name: David Baker

What he does: David is a member of FTI Capital Advisors, FTI Consulting’s investment banking subsidiary. He has over 30 years of experience in international M&A, capital formation, partnership agreements, and corporate strategic development.

Organization: FTI Consulting

Connect: LinkedIn

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

On this episode of The Banker's Corner, McGuireWoods' Geoff Cockrell chats with Larry Barr, Partner at Middle Branch Partners, to discuss the buy side of private equity transactions, particularly in the healthcare industry. 

Investors looking for buy-side representation benefit from working with firms that have in-depth knowledge of the specific segment they are interested in and with partners who have long-standing relationships in that area. For buyers looking to validate their purchase hypothesis, working with a knowledgeable firm and advisory board can provide operational insights and relationship connections needed to validate a potential deal. 

Larry also shares his take on some of the drivers bringing private equity investment into the MedTech space. Despite uncertain waters due to macroeconomic dynamics and uncertainty around credit availability, Larry remains bullish on MedTech. 

“I'm one of those that's a perennial bull,” Larry explains, “As I like to say, I couldn't do what I do for a living if I wasn't an optimist.” He cites the recent MedTech deal, coming in at just under $200 million, as proof that there are good transactions in the market and people are going to find a way to close them. 

Name: Larry Barr

What he does: Larry has been instrumental in building key strategic relationships between businesses in MedTech that have provided owners and investors with opportunities for growth and liquidity. Based on his prior experience, he understands the need to take a relationship based approach to achieve desirable outcomes for his clients. This has included M&A activities in various markets including respiratory, orthopedic, interventional, medical equipment, and other devices across diverse geographies including Asia, Europe, and Israel.  Prior to this, he served as CFO in middle market firms and in lower middle market leading at MB Financial Bank, Fifth Third, and The Bank of Montreal.

Organization: Middle Branch Partners

Connect: LinkedIn

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

On this episode of The Banker's Corner, McGuireWoods' Geoff Cockrell sits down with Geoff Smith, a managing director in and co-head of the Healthcare & Life Sciences Group at Harris Williams, and Charles Busch, a vice president in the Healthcare & Life Sciences Group at Harris Williams. They both have spent much of their careers working specifically in the physician practice management (PPM) and consumer healthcare sectors.

PPM and the consumer healthcare sector are often referred to interchangeably, but they have very different needs and areas of focus in the market. In consumer healthcare, patients play a more prominent role in their choice of providers, leading to a larger overall focus on the consumer experience. PPM, by contrast, is more often driven by referrals. But these distinctions are softening.

“One of the things that we've certainly seen over the last 20 years, which has really accelerated in the last few, is that the lines are blurring between traditional, pure PPM and consumer healthcare,” Geoff Smith explains. “One of the things that we've seen and work with clients to help them think through is exactly how to describe their company, how to describe their positioning, how to think about it from both a patient or a consumer perspective, as well as from a potential investor perspective.”

Geoff and Charles explore the appeal of PPM to investors, who are increasingly drawn to the market’s long-term tailwinds, positive supply and demand dynamics, and reimbursement stability. They also reflect on the current market and what trends they expect to see in the future.

Name: Geoff Smith

What he does: Geoff is a managing director in and co-head of the Healthcare & Life Sciences Group at Harris Williams, where he has worked broadly across the healthcare landscape and spent a significant portion of his career focused on consumer healthcare and physician practice management.

Organization: Harris Williams

Connect: LinkedIn

Name: Charles Busch

What he does: Charles is a vice president in the Healthcare & Life Sciences Group at Harris Williams, where he spends the majority of his time in physician practice management, with a focus on dermatology and orthopedics.

Organization: Harris Williams

Connect: LinkedIn

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Subscribe to The Banker’s Corner in your preferred podcast app so that you never miss an episode. 

This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

On this episode of The Banker's Corner, McGuireWoods' Geoff Cockrell invites Mikel Parker, Head of Investment Banking and Managing Director at AMB, to discuss current valuation trends in healthcare IT and other sub-sectors. 

As a firm, AMB broadly focuses on healthcare services, healthcare IT, and pharma services, but during this episode, Mikel mainly discusses healthcare IT trends and insights to the company’s services in this sector. 

Mikel breaks down the healthcare IT market, pinpointing four main sectors within the concentrated field, as well as the two types of buyers he comes across in his work. In a COVID-world, the trend toward more digital monitoring and healthcare access continues to grow, opening up opportunities for investors and companies alike. From ongoing trends to down-the-line predictions, Mikel discusses all things transactional within the world of AMB, particularly this growing field of healthcare IT.  

Name: Mikel Parker

What he does: As the Head of Investment Banking and the Managing Director at AMB, Mikel handles client strategy, sourcing deals and transaction execution. Over the course of his 20+ years in financial services and investment banking, Mikel has executed transactions across a wide spectrum of industries. 

Organization: AMB

Connect: LinkedIn

Top takeaways from this episode

★    Healthcare IT has been, and will continue to be, a popular trend. Mikel predicts healthcare IT will continue to prove profitable as companies adjust to this new COVID-world where the digitization of healthcare is so much more vital than it was pre-pandemic. 

★     The market is shifting models. Trends seem to show that companies are shifting from transaction-based models to recurring-based models. In other words, companies are changing models to improve their profit margins by switching revenue models. 

★     There are four sectors of healthcare IT. Throughout his many transactions with AMB, Mikel has observed four main categories, or sub-sectors, within the realm of healthcare IT: revenue cycle management, patient engagement, HIM coding, and services-side monitoring. As an advisor, each of these needs to be tended to and organized in order for the client to achieve the most success. 

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

On this episode of The Banker's Corner, McGuireWoods' Geoff Cockrell invites Barry Freeman, Managing Director of Lincoln International’s U.S. healthcare industry team, to discuss trends and investing opportunities in home health, hospice, and palliative care.

Barry shares his in-depth knowledge of the home healthcare space including the key takeaways he learned at the recent Home Care 100 industry event.  

From labor shortages making it difficult to find trained professionals to an increase in demand as care at home becomes the future of the industry, there is currently a lot of attention on the home healthcare space. 

While the industry is not without its challenges, the increased focus on technological advancements has made it more attractive for investors — by providing better solutions within the industry, investors can more accurately predict risk.

Barry walks listeners through changes in the industry and where he believes the sector is headed. He also discusses opportunities for providers to get more involved in the space. It’s clear that the industry is shifting to more home-based care and Barry believes the trend isn’t going anywhere anytime soon. 

Name: Geoffrey Cockrell

What he does: Geoff is the Chair of McGuireWoods’ private equity group and serves on the firm's Board of Partners; he has extensive experience in mergers and acquisitions, especially in the healthcare space.

Organization: McGuireWoods

Connect: LinkedIn

Name: Barry Freeman

What he does: Barry co-leads Lincoln’s U.S. healthcare industry team and provides M&A advisory services for healthcare payors, providers, and healthcare IT companies. He has over 25 years of experience in both investment banking and principal investing.

Organization: Lincoln International

Connect: LinkedIn

Top takeaways from this episode

★   Investors are interested in home healthcare. According to Barry, the recent Home Care 100 Conference had record-breaking attendance, which reflects the renewed interest the sector is seeing from investors.

★   Labor shortages in the industry are a long-term structural issue. The number one concern for companies in the home healthcare industry right now is the labor shortage. Barry believes this is a structural issue that will persist after the pandemic has ended. He predicts that we can expect to see state and federal support for the in-demand industry. 

★   Advances in technology have made it easier to predict and manage risk. Despite the labor challenges in the industry, increased demand for home healthcare services combined with technological advancements is making it easier to manage risk and keeps investors interested. 

[02:22]: Industry trends: Barry recently attended the Home Care 100 Conference. He shares his learnings on the podcast. 

[03:22] A labor shortage crunch: Barry discusses the shortage of nurses and home care providers. He believes it is the current number one concern for businesses in the industry.

[05:22] Demand for in-home care: The stories of death and disruption throughout the pandemic have resulted in an increased demand for in-home care. 

 [08:49] Technology investment provides an opportunity: Barry has observed how the investment in technology is creating new opportunities for those in the industry. 

[11:18] Market opportunity for in-home care: Barry breaks down the different segments of the industry and reviews why he sees an opportunity for growth in the home care space over the traditional institutional providers. 

[13:27] Home-based models are in high demand: Barry shares that while there is market growth across the board in healthcare, he sees the greatest demand in the at-home care space. 

[13:59] Investor value: Investors can find value in the market by focusing on providers who are offering a continuum of care for patients as their needs progress through different stages. 

[15:49] Strong appetite for acquisitions: Barry talks about how acquisition has been one of the main catalysts for growth in the industry. He sees this trend continuing in 2022 with some investors looking to mix in organic growth alongside their acquisitions.

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

On this premiere episode of The Banker's Corner, McGuireWoods' Geoff Cockrell sits down with Justin Hand, Managing Director at Westcove Partners, to discuss the trends, solutions, and business issues affecting the healthcare private equity market.

2021 concluded with a flurry of activity for the healthcare market, setting the stage for this timely conversation.  Many deals were squeezed in and closed at the 11th hour, with many more carried over into the new year.

With the past year ending on such a high note, what drives these trends? And what can we expect in 2022? 

For one, there will be more healthcare M&A as a byproduct of the backlog of deals, capital gains, and the tailwinds of smaller practices losing competitive muscle and wanting to sell to larger ones.

This trend promises to continue, although there are concerns over increasing interest rates, larger funds and new players, a shift in multiples, and disruptive evolution in the healthcare sector.

Name: Geoffrey Cockrell

What he does: Geoff is the Chair of McGuireWoods’ private equity group and serves on the firm's Board of Partners; he has extensive experience in mergers and acquisitions, especially in the healthcare space.

Organization: McGuireWoods

Connect: LinkedIn

Name: Justin Hand

What he does: As the Founder and Managing Director of Westcove Partners, Justin is involved in most active mandates, oversees financial sponsor coverage, maintains key third-party relationships, and leads the firm's Impact Investing initiative.

Organization: Westcove Partners

Connect: LinkedIn

Top takeaways from this episode

★    Healthcare businesses are not immune to the pandemic. According to Justin, entrepreneurs have a hard time withstanding the different variants of COVID, competing with private equity-backed portfolio companies, and dealing with employment challenges.

★    The more complex the competition, the more M&A deals. More acquisitions and consolidations will happen as the competitive landscape becomes increasingly brutal for small and less capitalized practices. More so because the high multiples is a great incentive, but beyond that, it is a more secure way to take the brand into the future. And with the potential for recapitalization, there’s more to consider.

★    Investors have a responsibility to drive disruptive evolution in the healthcare business. Early-stage businesses with a bolder idea of how they can influence healthcare deserve as much funding as those doing five-plus in EBITDA. Ultimately, Justin sees a trend where those five-plus EBITDA businesses will sooner or later have to exit or merge with the disrupters.

[02:48] Capital gains are driving exits: Justin believes more healthcare exits will continue through 2022 as capital gains are expected to stay the same.

[04:42] More alignments: As small and less capitalized patient-facing healthcare businesses struggle to compete in a COVID world, more M&A is imminent.

 [06:48] Rising interest rates, new money: Justin predicts that private equity firms will be more aggressive in 2022 despite the expected rise in interest rates.

[08:57] Recapitalization is coming. Justin outlines recapitalization precedents and why there is more to partnerships for physicians beyond the cash considerations at the close.

[12:37] Value-based care is here to stay: the market is starting to recognize the benefits of value-based care and the ability to measure outcomes in healthcare businesses.

[14:17] Disruptive evolution: Justin and Geoff cite the immense potential for disruptive innovation in healthcare and the opportunities for investing.

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

This is “The Banker’s Corner” a McGuireWoods series exploring investment trends, solutions and business issues relevant in today’s private equity and finance industry. Tune in with McGuireWoods partner, Geoff Cockrell as he and specialists share real-world insight to help enhance your knowledge.

McGuireWoods is a full-service firm providing legal and public affairs solutions to corporate, individual, and nonprofit clients worldwide for more than 200 years collectively. Our commitment to excellence in everything we do gives our clients a competitive edge in everything they do. Our law firm, over its 186-year history, has earned the loyalty of our many long-standing clients with a deep understanding of their businesses, and broad skills in corporate transactions, high-stakes disputes, and complex regulatory and compliance matters.

To learn more about our discussions, please email host Geoff Cockrell at [email protected] or visit our website at mcguirewoods.com.

This series was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this series, you acknowledge that McGuireWoods makes no warranty, guarantee or representation as to the accuracy or sufficiency of the information featured in this installment. The views, information or opinions expressed are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This series should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.