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HIG steps up with $500m-plus deal for Gryphon’s CORA Health Services 

A formal Jefferies-run sale process for CORA was relaunched in February, after 2020 exit plans were put on hold during the pandemic.

HIG Capital has agreed to acquire CORA Health Services from Gryphon Investors as the physical therapy market continues to rebound amid the reopening of the US, according to three sources familiar with the matter.

The deal, which was signed a couple of weeks ago, values CORA at more than $500 million, according to some of the people. HIG is acquiring the Charlotte, North Carolina-based company – which does business as CORA Physical Therapy – through the HIG Advantage fund, they said. 

The pending transaction is set to provide a full exit for Gryphon, one of the people said. The San Francisco-based mid-market private equity firm originally invested in CORA in June 2016. 

Led by CEO Dennis Smith, CORA’s affiliated clinics offer a complete range of treatment, including outpatient physical therapy and general rehabilitation, workers’ compensation therapy, sports and auto injury rehabilitation, pediatric therapy, rehabilitation for seniors and therapy in the home. 

Although CORA’s roots are in central and south Florida, more recent growth has been in the Carolinas, Virginia, Tennessee and into the Midwest. Today Cora operates more than 225 clinics in nine US states, including specialty clinics under the Body Gears brand.

CORA is projecting 2021 EBITDA in the low $30 million range, which, based upon a $500 million-plus value, suggests an EBITDA multiple of 15x-plus.

Sources said a formal auction via Jefferies was relaunched in February, after Gryphon’s 2020 exit plans for CORA were put on hold during the pandemic. They added that a competitive process was aimed exclusively at sponsors seeking a platform in the sector. 

Jefferies was originally hired early 2020, PE Hub wrote, and has remained sell-side adviser since then.

The physical therapy industry remains highly fragmented. It is viewed as a longer-term beneficiary of the broader shift in care to outpatient settings. At the same time, sources said that renewed demand stemming from a backlog of delayed elective procedures is helping fuel the industry’s comeback.

Elective orthopedic procedures started to pick up in late 2020, a leading indicator for many physical therapy businesses, one source said. 

As evidence of a rebound, publicly traded US Physical Therapy said in a recent earnings call that March was a record month in terms of volumes of new patients and visits.

Although at the height of the pandemic a large portion of PT sessions were done through telehealth, a source added that most appointments are once again in-person: “At the end of the day, people have realized that for something like physical therapy, your best course is to be in-person.”. 

Another source said that CORA, for its part, is run by a strong management team and plays in a growing region of the country – Florida and the south-east – and that these factors give it additional appeal to the sponsor community. More generally, this source added, assets with diversity in geography or in markets where shutdowns were less draconian than elsewhere have tended to have stronger volumes. 

In large-scale physical therapy activity this year, Advent International-owned ATI Physical Therapy in February agreed to merge with Fortress Value Acquisition Corp. The industry giant intends to ultimately list on the NYSE, thereby becoming one of two publicly traded, pure-play physical therapy companies, alongside US Physical Therapy.

The transaction valued ATI at a $2.5 billion enterprise value – or 14x 2022 estimated adjusted EBITDA. 

HIG, for its part, knows the therapy market through another investment. The firm in 2018 invested in Reliant Rehabilitation, a national provider of contract therapy services to skilled nursing facilities.

The Miami-based private equity firm has been actively deploying capital in healthcare. In October it bought St Croix Hospice, valuing the Midwest-focused end-of-life care business at approximately $580 million, PE Hub wrote. The deal was also done through HIG Advantage.

This month, HIG completed a $225 million strategic minority investment into eHealth, a health insurance marketplace, in the form of convertible preferred stock.

Gryphon and Jefferies declined to comment. HIG did not return PE Hub‘s requests for comment and company executives could not immediately be reached.