Activity in the gastroenterology physician practice management arena looks poised to pick up this year, with Audax Private Equity gearing up for a sale of Gastro Health, according to sources familiar with the matter.
A sale process is anticipated to kick off this quarter, the people said.
Moelis has been engaged for sell-side financial advice, sources said. The bank was originally hired before the J.P. Morgan Healthcare Conference in January 2020, but given the timing of the crisis, the company never came to market, one of the people added.
Sources placed EBITDA at approximately $65 million, and said they expect the Miami company to command a teens multiple. Scale platforms in the space ought to go for 15x-plus, two of the sources speculated.
Audax, about five years into its investment in Gastro Health, was one of the first entrants in GI physician practice management.
Under the Boston-based private equity firm, Gastro Health has expanded significantly, growing its affiliations to around 150 locations, according to its website – up from 21 at the time of its April 2015 recapitalization.
Beside white space for growth through consolidation and additional ancillary services, Gastro Health is likely to appeal to potential suitors given its success expanding outside of its Southern Florida roots, sources said. The medical group now operates in markets across Florida, Alabama, Ohio, Virginia and Washington.
Gastro Health physicians and advanced practitioners specialize in the treatment of gastrointestinal disorders, nutrition and digestive health, offering a range of ancillary services, including colorectal and general surgery, in-house infusion, diagnostic services and pharmacy services.
The upcoming process follows a year in which few scale PPM platform assets traded hands, with the women’s healthcare market standing out as an exception in 2020. Toronto’s Altas Partners agreed to join Ares Management as an investor in Unified Women’s Healthcare in a more than $1.5 billion deal, while Europe’s BC Partners bought Lindsay Goldberg’s Women Care Enterprises in a close to $900 million transaction, PE Hub wrote.
There was, however, one GI platform deal completed in the height of the coronavirus-fueled downturn. In April, Webster Equity Partners launched a new gastroenterology platform, One GI, managing to clinch an all-equity deal for Tennessee’s Gastro One, PE Hub wrote.
Waud Capital and Frazier Healthcare Partners both entered the segment in 2018 via deals for Texas Digestive Disease Consultants and United Digestive (formerly Atlanta Gastroenterology Associates), respectively.
Amulet Capital in 2019 married three southeast Pennsylvania gastroenterology groups in a transaction valued at approximately $130 million, forming an MSO called US Digestive Health, PE Hub reported. Varsity Healthcare Partners in 2019 invested in The Steadman Clinic, Colorado’s world famous sports medicine practice, through Orthopedic Care Partners.
For Audax, the process comes as it preps for the sale of another healthcare portfolio company, Axia Women’s Health. PE Hub wrote in January that a process is expected to kick off early this year.
Audax, Moelis and a company representative declined to comment.