Lots going on again in healthcare M&A this week. Further indicative of financial buyers appetite for outsourced pharma services, Windjammer Capital agreed to sell Advanced Instruments to Investor AB’s Patricia Industries for an enterprise value of $780 million – a deal one source familiar with the matter said translated to a nearly 20x EBITDA multiple. Windjammer didn’t return requests for comment, but I’m hearing the firm also made a hefty return in the upper single digits.
Social Determinants of Health and SPACs
This week also produced another notable deal in the personal home care space, with One Equity Partners’ Simplura finding a buyer in Providence Service Corp, which through LogistiCare is the country’s largest provider of non-emergency medical transportation. (Providence, btw, was in the marekt in 2018, I previously wrote.)
The deal follows a recent bet by Centerbridge Partners and Vistria Group, which teamed up to acquire a majority stake in Wellspring Capital’s Help at Home in a $1.4 billion deal.
On the surface, the marriage of a transportation company and personal care provider looks an odd combination. But if you dig a little deeper, it’s clear that Providence and Simplura share a common goal: reducing medical costs for complex and vulnerable patient populations.
Importantly, both are built around the mindset that ‘social determinants of health’ play an instrumental role in health outcomes and spend. Together the newly combined company can address even more non-clinical social and environmental factors that contribute to the medical needs of low income, high risk patient populations.
Check out my story for more on the deal and SDOH.
It’s also worth noting that both Simplura and Help at Home traded hands at EV-to-EBITDA multiples around the 11x to 12x range, whereas their publicly-traded peer, Addus HomeCare, has for long traded at a loftier multiple. Addus currently trades at approximately 19x based upon its LTM EBITDA at the end of June.
So what gives? It’s not entirely clear. It’s possible Addus is applauded by investors simply because it’s unique in the broader universe of public home care companies, I’m told. That is, it’s the only predominantly personal care services player. Still, there are other related companies like Amedisys, a home health and hospice care provider, which is trading at an even healthier multiple. (Home care, by the way, also benefits from having bipartisan support.)
SPAC vehicles have taken notice of the high public trading levels, sources with knowledge of the matter told me, with players including Simplura having garnered interest. Should a SPAC still see the value to be had in creating a public comp for Addus, it’s always possible Help at Home could remain a potential target.
The SPAC interest isn’t all that surprising if you’ve been paying attention to activity this summer.
As of September 30, 185 special purpose acquisition companies are sitting on more than $58 billion of dry powder (compared with $3.9 billion raised across 20 SPAC IPOs five years ago), according to SPAC Research.
In healthcare, we recently saw former KKR healthcare head Jim Momtazee join the club, with his new firm Patient Square Capital sponsoring a SPAC that has filed to raise up to $500 million in an IPO. Elsewhere, Hellman & Friedman opened up a lot of eyes when its portfolio company Cotiviti agreed to merge with a SPAC in an $11 billion deal.
Is investor psychology and the contagion effect at play here? Not so, says Jeff Mortara, head of ECM origination at UBS: “Don’t think of this as a fad or flash in the pan.” (Mortara believes there are actually a shortage of biotech and TMT SPACs right now.)
Check out my recent deep dive looking at the proliferation of blank check companies.
JLL Partners has agreed to acquire healthcare analytics software firm MedeAnalytics from Thoma Bravo, five years into the latter’s investment, according to people familiar with the deal. Read more.
GTCR has hired advisers to explore the sale Transaction Data Systems, the country’s largest provider of software specializing in independent pharmacy management, according to four people familiar with the matter. Read more.
Finally, in an effort to develop one of the first approved treatments for a rare disease called Eosinophilic Esophagitis (EoE), TPG Capital has created a third growth opportunity out of a thesis (and a team) the firm first got behind a decade ago.
Check out my interview with the firm’s Todd Sisitsky and John Schilling.
That’s all for me today. As always, write to me with any comments, tips or just to say hello.