Financial sponsors circle ENT and Allergy

Tarrytown, New York-based ENTA hit the market pre-covid via FocalPoint, representing one of few PPM processes that has persisted through the downturn.

ENT and Allergy Associates, the largest physician-owned provider of allergy treatment services in the country, is seeking private equity backing, according to four sources familiar with the process. 

FocalPoint Partners is advising the group, which services the New York and New Jersey area, on the process, sources said.

The process aims to produce a change-of-control transaction, under which a PE firm would assume slight majority ownership through investment in ENTA’s management services organization, or MSO. The company’s physician owners are expected to roll equity in the deal.

The provider, headquartered in Tarrytown, New York, initially hit the market pre-covid-19. Clinics were materially impacted by government-mandated closures around the March-April time-frame, but the process persisted. Due dates for IOIs were pushed back by two to three weeks, sources said. 

Many of ENTA’s Manhattan offices remain in the early phases of reopening, while many clinics are now approaching pre-covid levels, two of the people said. With many NYC residents flocking to areas such as Long Island, increased levels at other locations have partly offset Manhattan’s slower ramp-up, one of the people said.

The process is targeting getting a deal closed in the first quarter of 2021, sources said. First round bids were submitted over a month ago and in-person management presentations are scheduled to occur later this month, two of the people said. 

ENTA was initially marketed off of 2019 EBITDA in the high $40 million range, two of the people said. The process is angling for mid-teens EBITDA multiple, sources said.

As ENTA clinics ramp back to normal, pre-covid patient levels, sponsors are waiting to see what the full impact of the pandemic will be on earnings.

Consistent with other physician practice management deals, the group’s 150-plus physician owners add further complexity when it comes to reaching and structuring a deal, sources said.

That said, ENTA represents a rare opportunity of scale in the current climate to enter a healthcare specialty that has seen little institutional backing to date. 

ENTA makes for an attractive PE investment for reasons including the recurring nature of allergy treatment services and an attractive payer base, with the majority of treatment reimbursed through commercial payors. Its existing density in New York and New Jersey, ENTA’s physician retention model, a large consolidation opportunity and existing hospital partnerships add further appeal, sources said. 

Founded in 1998 through the marriage of three practices and 12 partners, ENTA has grown to more than 220 physicians across 46 locations in New York and New Jersey. The physician group encompasses more than 100 licensed audiologists.

Its services include treatment of general adult and pediatric ENT and allergy conditions, voice and swallowing, facial plastics and reconstructive surgery, disorders of the inner ear and dizziness, asthma, allergy, clinical immunology, diagnostic audiology, hearing aid dispensing, sleep and CT Services.

ENTA has clinical alliances with Mount Sinai Hospital, Montefiore Medical Center, Northwell Health and a partnership with the American Cancer Society.

Although the segment has seen little private equity investment to date, Allergy Partners hit the auction block in 2017 via Wells Fargo, PE Hub wrote. The auction did not produce a deal.

The largest player after ENTA is South Florida ENT, which last year scored backing from Audax. In other 2019 activity, Shore Capital Partners created a new platform, Southern Ear, Nose, Throat and Allergy Partners.

In 2018, Source Capital invested in Texan Allergy, and Prairie Capital recapitalized Family Allergy & Asthma.

In what appears to be the earliest investment in the category, San Antonio’s United Allergy Services scored a capital injection from Serent Capital in April 2012. The deal was valued at more than $50 million, the San Antonio Business Journal reported.

ENTA executives and FocalPoint declined to comment. 

Action Item: Read more about ENTA.