CORE, Frazier Healthcare-backed orthopedic group, readies for sale

  • Frazier led ’17 growth investment in Phoenix company
  • CORE: 19 locations in AZ, eight in MI
  • Segment has drawn minimal PE investment

CORE Institute, one of the first orthopedic care groups to attract private equity investment, is gearing up for a sales process, according to people familiar with the matter.

Houlihan Lokey has been engaged to provide financial advice to the Phoenix company, people said.

A formal process is expected to launch around the end of January or early February, one of the people said. The expected process comes about two years after Frazier Healthcare Partners led a growth-equity investment in the group alongside Princeton Ventures.

The company expects to produce 2019 Ebitda of about $20 million, two people said. While few assets in the vertical have transacted to date, specialty physician groups of scale have tended to command multiples of Ebitda in the teens.

Launched in 2005 as the Center for Orthopedic Research and Education, CORE today offers integrated musculoskeletal and neurological care through 19 orthopedic facilities in the greater Phoenix area and is the state’s largest such group. CORE also has eight locations in Michigan.

Frazier lists Nathan Every, Brian Morfitt and Philip Zaorski as associated investment-team members.

As the healthcare-PE community proactively seeks new physician specialties to consolidate, musculoskeletal care is among those considered ripe for investment.

The vertical is growing increasingly appealing, fueled by demand for orthopedic procedures as an aging population requires more knee and hip replacements and the like.

At the same time, an active young demographic sets the stage for more treatment needs for conditions that are likely to result from exercise and sports injuries.

Varsity Healthcare Partners is among the few sponsors to have followed Frazier’s January 2017 entrance into the segment.

The healthcare-exclusive firm in November 2017 invested in Orthopaedic Institute, the largest provider of orthopedic services and ancillary offerings in north-central Florida. Houlihan Lokey offered sell-side advice on the deal.

In other activity, Atlantic Street Capital in September 2018 acquired OrthoBethesda, which offers orthopedic services in the greater Washington region.

In recent activity involving Frazier, the firm, with offices in Seattle and in Menlo Park, California, in December acquired Atlanta Gastroenterology Associates, one of the first PE bets in the GI specialty.

On the sell side, Frazier is among investors in dialysis-services provider U.S. Renal Care, which is working with Goldman Sachs on a sales process, Buyouts reported in December.

Frazier and Houlihan Lokey declined to comment, while representatives of Princeton Ventures and CORE couldn’t immediately be reached.

Action Item: Reach out to Frazier at +1 206-621-7200