The Corner Series

The fee-for-service model in U.S. healthcare is going to become more and more unattractive. However, shifting to a value-based care paradigm can move the healthcare system towards better outcomes, lower costs, better patient access and experiences–and also, provides investment opportunities.

In this episode of The Capital Corner, McGuireWoods’ Geoff Cockrell is joined by Andrew Clark, managing partner at Leavitt Equity Partners, to discuss investment opportunities in value-based care. 

Tune in to hear Geoff and Andrew explore the evolution of value-based care and how it will continue to shape the healthcare industry. They discuss the different sectors that lend themselves to value-based care investment, including primary care, chronic care, episodic care, and women's care. They also address the disruptive potential of non-healthcare participants like Amazon, payer and provider convergence, and the role of artificial intelligence in driving efficiency and improving patient care.  

☑️ Andrew Clark | LinkedIn

☑️ Leavitt Equity Partners | LinkedIn 

☑️ Geoff Cockrell | 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.

After an active 2022, this year has seen a shift in the PPM space. There are now challenges around the cost of capital, pricing, and labor. Some who raised a lot of capital in 2022 will still be looking for deals, while others are more cautious, putting more emphasis on valuation and financial performance.   

On this episode of The Banker's Corner, McGuireWoods' Geoff Cockrell sits down with Robert Aprill, Managing Director at Physician Growth Partners, to share insights on how the market might evolve in 2023 and beyond. Robert’s focus on helping physicians and physician-led businesses navigate private equity within their medical specialty gives him a front row seat to the headwinds this sector is facing currently. 

The aftermath of COVID has led many business owners to reevaluate the importance of size and scale in their operations; they are now more open to considering partnering with larger entities to navigate uncertain futures. 

The role of advisors in private equity is to educate clients about various compensation and alignment options when considering partnerships with healthcare platforms. The focus is on an equity perspective and a comp perspective to ensure that physicians are partners and are compensated based on their performance and the practice's performance, promoting alignment through incentives rather than punitive measures like production thresholds. 

“We spend a lot of time with our clients. I think oftentimes with us, we're presenting something versus having buyers present something to us,” explains Robert. 

The two also discuss areas of consolidation, interest in niche specialties, and aligning equity with compensation.  

Name: Robert Aprill

What he does: Robert is a Managing Director at Physician Growth Partners. With prior experience as a healthcare investment banker, he now advises founder- and provider-owned businesses in the healthcare services industry as they prepare for and ultimately pursue a transaction. 

Organization: Physician Growth 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.

When introducing the idea of private equity entering a business, it’s important to make the potential value-add clear from the initial conversation. Doctors are often skeptical about private equity ownership, but providing references and having a clear focus on growing revenue over cutting costs can help facilitate these early conversations.

On this episode of The Capital Corner, McGuireWoods' Geoff Cockrell invites Alessio Baraldi, Managing Director at Albaron Partners, to discuss value creation in healthcare provider services. This topic is timely as the market has shifted from an environment where all investors were finding wins in the sector, to today’s environment, which has more challenges to overcome. 

Alessio provides insight into the equity structures that have worked the best for his portfolios and how he prefers to approach compensation to keep everyone aligned. “What we found is that in an environment where there is quite a bit of wage inflation, having a unified system where the management team is able to manage expenses at the center level without relying on the doctors making those calls, has been quite helpful,” he says.

Value creation from a growth strategy can be quite effective, and different firms use various approaches like de novo or acquisitions. Alessio and Albaron Partners prefer a mixture of both to add the most value to their partners. 

Integrations and centralization are two other ways to provide value to a portfolio company. Being well-integrated and centralizing support functions like billing and call centers can help a company adapt to unique challenges such as wage inflation while increasing operational efficiency. 

Name: Alessio Baraldi 

What he does: Alessio founded Albaron Partners in 2017. He plays a key role in directing the firm’s strategy and investment decisions. Alessio is responsible for sourcing and executing new investments, monitoring portfolio companies as an active board member, and overseeing exit processes.

Organization: Albaron Partners

Connect: LinkedIn

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Subscribe to The Corner Series 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.

The difficulties faced by healthcare provider consolidations could be temporary or they could indicate a long-term decline in the attractiveness of consolidation. Some challenges, like high debt and labor market imbalances, are temporary and don't reflect the fundamental quality of the businesses involved. 

On this episode of The Banker’s Corner, McGuireWoods' Geoff Cockrell is joined by Mark Francis, Managing Director and Global Head of Healthcare Investment Banking at Houlihan Lokey. The two discuss the future of healthcare provider consolidations through the lens of those working in the industry right now. 

Over the past six to eight months, some larger platforms that had been acquiring smaller companies have paused their acquisition activities due to a disconnect between seller expectations and current valuations. They were also waiting for more favorable credit conditions and pricing adjustments. Now, these platforms are beginning to look to the market again and see what is available. 

Geoff and Mark discuss the healthcare sector’s resilience during economic slowdowns. Healthcare is often less volatile than other sectors, making it an attractive option for investors looking to allocate funds during economic uncertainties.

Healthcare is a mature market, but new interest in private equity has led to a reshuffling of focus within sectors. Some sectors like healthcare technology, veterinary care, and behavioral health remain highly attractive despite varying trends in their valuations.

Later on in the episode, Mark and Geoff discuss valuations and the importance of running and operating integrated businesses. “Great companies get great valuations, and we can debate what great is, but if people don't feel good about the valuations, largely they're not trading,” says Mark.

Name: Mark Francis

What he does: Mark is a Managing Director and Global Head of Houlihan Lokey’s Healthcare Group. He has nearly 25 years of experience in M&A and financial operations in the healthcare industry and has managed a wide variety of projects, including divestitures, financial restructurings, joint ventures, and strategic alliance formation. 

Organization: Houlihan Lokey

Connect: LinkedIn

Connect with us on Facebook, Twitter, Instagram, YouTube.

Subscribe to The Corner Series 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.

The healthcare market may be tumultuous these days, but deals are still happening. 

On this episode of The Professor’s Corner, Diwakar Sinha of Polaris Healthcare Partners joins McGuireWoods’ Geoff Cockrell to discuss how practices can prepare to sell, what specialties are especially attractive, and how the search for investors varies from practice to practice.

According to Diwakar, the same volume of deals are occurring, but the number of A-grade deals may be fewer. Currently, most A-grade deals exist in certain specialties. 

Diwakar recommends that group practices run a quality of earnings (QOE) analysis to firm up their EBITDA projections. This eliminates some of the doubt for investors and makes a deal more appealing.  

Diwakar also predicts that the cost of capital will come down mid-2024, which is a good reason to start planning from the sell-side now. 

On the consulting side of Polaris Healthcare Partners, Diwakar shares that for a practice to engage Polaris Healthcare Partners, it typically needs seven to 10 locations with aspirations to grow. At that point, the leadership team needs to expand to include a CFO and a more robust accounting team.

Tune in for more on current trends in healthcare group practice investing.

Name: Diwakar Sinha

What he does: With about 22 years of experience in healthcare lending and transaction services, Diwakar is a Co-Founder and Partner at Polaris Healthcare Partners. Polaris provides consulting services to healthcare group practices across all specialties, as well as capital and sell-side advisory. 

Organization: Polaris Healthcare Partners

Connect: LinkedIn

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Subscribe to The Corner Series 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.

While primary care tends to be overlooked by investors, the industry is shifting to give it the interest it deserves. Regulatory changes, a focus on value-based care, and the potential to achieve both scale and savings, simultaneously, all have investors looking closer at primary care opportunities.

On this episode of The Banker's Corner, McGuireWoods' Geoff Cockrell discusses investing in primary care with Craig Sager, Director at Provident Healthcare Partners. In his current role, Craig leads sell-side M&A in primary care and behavioral health. 

Investors in primary care are typically private equity firms that have shorter timelines on when they expect to see a return on their investment. Alternatively, sometimes payer-owned entities invest. They have the ability to make long-term plays that might take decades to show a return. 

“These consolidations in primary care, in particular, have an easier to envision backend scenario. You have these massive companies like CVS or UnitedHealthcare, that can be those backend purchasers. It changes some of the dynamics for the private equity investors as well,” says Geoff. 

Craig also shares his insights on investors working with fee-for-service healthcare groups. Some investors may find it too risky and prefer to wait for the transition to value-based care before investing. Others see an opportunity to enter at a lower price and facilitate the conversion to value-based care. 

Looking at the end of 2023 and into 2024, investors can be confident that there is always going to be interest in this sector and there is capital available to be deployed. 

Name: Craig Sager

What he does: Craig Sager is a Director at Provident Healthcare Partners. He has over nine years of healthcare M&A experience via principal investing, corporate development, and sell-side advisory. He has executed over 30 transactions on both the buy-side and sell-side.

Organization: Provident Healthcare Partners

Connect: LinkedIn

Connect with us on Facebook, Twitter, Instagram, YouTube.

Subscribe to The Corner Series 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.

From orthopedics and cardiology to urology and even med spas, the future of specialized healthcare clinics is here — and growing rapidly each quarter. 

“The med spa industry is growing double-digit right now. The patient total addressable market continues to expand with the younger generation utilizing those products and services, and male patients and consumers using those products and services,” Rich Blann says of this current trend in healthcare private equity. 

On this episode of The Capital Corner, McGuireWoods' Geoff Cockrell sits down with Hector Torres and Rich Blann, both of whom are Managing Directors at DC Advisory on their global healthcare team. They discuss market trends and some current areas of interest from both investors’ and sellers’ perspectives.

Hector and Rich share the challenges they’ve seen to the market this year, as well as where they see the upward trends heading. From the bid-ask spread to physician practice consolidations, they share plenty of advice and hope for the remainder of the year.  

And while general M&A volume is down, Hector and Rich find there’s a silver lining: the decreased volume is actually better for the industry as a whole. In 2021 and 2022, there was an overabundance of M&A. Now, this general decrease gives these groups the opportunity to digest all of the M&A deals and integrate those businesses the right way. This will better set the stage for the market in the coming years. 

Tune in to hear more about the current market and why the dismal year so far is no reason to fear the months to come.

Name: Hector Torres

What he does: Hector is a Managing Director of DC Advisory’s global healthcare team. With nearly 20 years of investment banking experience, Hector specializes in M&A and strategic advisory transactions.

Organization: DC Advisory

Connect: LinkedIn | DC Advisory

Name: Rich Blann

What he does: Rich is a Managing Director of DC Advisory’s global healthcare team. Rich brings more than 23 years of global investment banking experience to the table, with a focus on M&A and capital raising.

Organization: DC Advisory

Connect: LinkedIn | DC Advisory

Connect with us on Facebook, Twitter, Instagram, YouTube.

Subscribe to The Corner Series 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.

The healthcare system is one of the most fragmented industries in the United States. But as strategic players begin consolidating through mergers and acquisitions, private equity investors are seeing growth opportunities in the industry. 

On this episode of The Banker's Corner, McGuireWoods' Geoff Cockrell invites Rex Burgdorfer, Partner at Juniper Advisory, to discuss M&A trends, consolidation, and activity in the healthcare sector. 

The hospital industry presents challenges for private equity in terms of regulation. This limits investors’ ability to exert control and influence over management compared to other sectors. A successful model that has emerged is the partnership between private equity firms and high-quality academic medical centers. 

But how is this changing business model impacting investors’ interest? According to Rex, fewer well-capitalized investor-owned companies are available today. What he has seen is nonprofits holding an advantage in making acquisitions due to tax exemptions, participation in programs like 340B drug pricing, and lower cost of capital from the tax-exempt bond market.

This trend may change in the near future as nonprofits struggle with access to capital and rising interest rates. 

Geoff and Rex also discuss trends for private equity and health systems, regulatory scrutiny in the industry, creative competitors, and how a looming recession could affect the industry. 

Name: Rex Burgdorfer

What he does: Rex has over two decades of investment banking and strategic financial advisory services experience. He has advised all forms of nonprofit hospital systems on M&A transactions, including academic, community 501(c)3, faith-based, and local government entities. Rex was previously with Morgan Stanley and holds an MBA from the Kellogg School of Management at Northwestern University.

Organization: Juniper Advisory

Connect: LinkedIn

Connect with us on Facebook, Twitter, Instagram, YouTube.

Subscribe to The Corner Series 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.

Closing a deal requires a lot of give and take, and in times of uncertainty, the right sponsors will have your back. 

On this episode of The Capital Corner, McGuireWoods' Geoff Cockrell joins Andy Silverman, Managing Director at Parkway Capital, to discuss the trends, deal structures and challenges that an SBIC may see in the market right now.

Geoff and Andy explore topics related to investment and underwriting, including the significance of independent sponsors in Parkway Capital’s deal flow. Andy notes that being a long-tenured capital partner of independent sponsors allows his firm to make informed decisions on which deals to pursue, with eight of their current nine portfolio company deals being independent sponsor-led deals. 

The evolving market has affected how EBITDA multiples are considered for mezzanine debt. Compared to previous years, there have been lower prices and a decrease in total funded debt requested by sponsors due to a decline in values and rising interest rates. 

The current underwriting environment has also presented new challenges, with companies experiencing pandemic-related benefits performing better than they would have otherwise. This can make it difficult to determine the baseline performance for the company, particularly with younger companies that were founded around 2020.

The senior cash flow lending market has also tightened up, with credit officers declining deals they would have previously approved.  

Despite these challenges, it’s important to keep the deals coming. “We continue to try and fill the pipeline because it really is a numbers game. You need to have X number of deals in order to put out Y LOIs to close Z deals,” Andy says. 

Name: Andy Silverman

What he does: Andy is the Managing Director at Parkway Capital, the mezzanine credit affiliate of Calvert Street Capital Partners. He helps manage the mezzanine investment business. Prior to Calvert Street / Parkway Capital, Andy was a partner at Capital Resource Partners (CRP), a long-standing private investment firm. 

Organization: Parkway Capital

Connect: LinkedIn

Connect with us on Facebook, Twitter, Instagram, YouTube.

Subscribe to The Corner Series 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.

The healthcare sector attracts interest from the investment community because it’s seen as being more resilient compared to other parts of the economy. But how does the medspa sector compare? During COVID, cosmetic procedures actually rebounded faster than the medical dermatology side. 

On this episode of The Banker's Corner, McGuireWoods' Geoff Cockrell discusses all things medspas with Mike Pisani, Managing Director and Co-Head of Healthcare Services at Houlihan Lokey. They discuss the trends, growth opportunities, and challenges that are present for today's medspas and how that affects investors' views of the space. 

The market has massive opportunity, and looking at the variety of services available, its value could be upwards of $25 billion. Combined with a strong margin profile, the opportunity for recurring revenue, and a cash-pay service line, this makes it attractive to investors. 

The medspa sector currently has a high level of fragmentation both in terms of the number of single clinic businesses that are operating and in how many businesses have been opened within just the past few years. This provides a high level of opportunity for investors looking for attractive deals in the sector. 

Recently there has been a mix of consumer and healthcare teams doing deals in the space. This has also been the approach at Mike’s firm, as they prefer to co-team a medspa deal with expertise from both sides. 

But where is the industry headed? Given the growth in the category and the opportunity still left on the table, true consolidation can be projected to be 5-10 years away still. 

“As we think out 10 years, which is oftentimes irresponsible to do, I think what you'll find is there's going to be some consolidation that exists to create national brand opportunities, but there's also going to be some convergence, where I think we'll see medical derm groups realize perhaps they need new and innovative models outside of their existing clinics,” Mike says. 

Name: Mike Pisani

What he does: Mike is the Managing Director and Co-Head of Healthcare Services at Houlihan Lokey. He has approximately two decades of healthcare and investment banking experience, including more than 15 years at Houlihan Lokey. During his career, Mike has closed more than 100 healthcare transactions, including sellside and buyside M&A transactions, and private financing and equity raise transactions for public and private companies.

Organization: Houlihan Lokey

Connect: LinkedIn

Connect with us on Facebook, Twitter, Instagram, YouTube.

Subscribe to The Corner Series 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.