Gryphon Investors has agreed to acquire Physical Rehabilitation Network in what marks its third investment to date in physical therapy, according to people familiar with the deal.
The pending deal, signed in mid-November, assigns PRN a valuation close to $280 million, the people said. The transaction is anticipated to close by year-end, providing an exit for existing investor Silver Oak Investment Partners.
PRN, a Carlsbad, California, network of physical therapy clinics concentrated in the western US, kicked off a sale process early this year ahead of the pandemic, with Houlihan Lokey retained as sell-side financial adviser, PE Hub wrote. At that time, PRN marketed EBITDA of approximately $20 million.
Deal books were distributed to potential bidders in February, with IOIs fielded around the time that covid shut down the country, sources said. Advisers on the process re-approached interested parties in the summer, one of the people said.
Deterring some private equity sponsors from jumping on the opportunity this summer, one source noted, was California Senate Bill 977, a law working its way through the legislative process at the time. While there has since been a resolution, the law would have given California’s attorney general Xavier Becerra never-before-seen authority over healthcare consolidation in California.
PRN, led by CEO Ajay Gupta, has grown its footprint to 136 clinics and 23 local brands across 12 states, according to its website. PRN also offers virtual physical therapy appointments through its telehealth platform.
For Silver Oak, a lower-mid-market PE firm based in Evanston, Illinois, the deal comes more than eight years into its investment. The firm led the recapitalization of PRN in April 2012 alongside management and co-investors. Under Silver Oak’s backing, PRN has completed eight acquisitions.
Most recently, PRN in August expanded through a joint venture it entered into with MemorialCare, a nonprofit Southern California integrated health system with more than 200 locations. PRN and MemorialCare partnered to operate 17 community-based, full-service physical therapy centers, with plans for additional centers over the next two years.
For Gryphon, this isn’t its first foray into physical therapy. The San Francisco firm in June 2016 invested in Lima, Ohio’s physical therapy provider CORA Health Services.
In January, ahead of covid, Jefferies was engaged to conduct a future sale process for the physical therapy business, PE Hub wrote. Sources now anticipate the process will get underway in 2021.
Gryphon also previously owned Accelerated Rehabilitation Centers, a Chicago-based provider of physical rehab services in the Midwest. Accelerated was acquired in 2011 by OMERS Private Equity, and subsequently sold to Athletico Physical Therapy in 2014.
As US Physical Therapy continues to trade at a robust level on the public markets, sources have said one scale asset to watch is the even larger ATI Physical Therapy, which was acquired by Advent International more than four-and-a-half years ago.
Particularly given where USPH trades, ATI is likely to consider an IPO down the road for its next phase of growth, sources have said, although it could also find an eager acquirer in a long-hold type of buyer like one of the Canadian pensions or family office groups.
Other large consolidators worth noting include Athletico, backed by BDT Capital Partners, a Chicago firm that has often invested alongside JAB, the large European family office. BDT bought Athletico from Harvest Partners, also in 2016, on the heels of Advent’s entry into the space.
Gryphon and Houlihan declined to comment. Silver Oak Partners did not return requests for comment and company executives couldn’t immediately be reached.