OMERS buys Audax’s Gastro Health at mid-$900m valuation

Being a first-mover is proving advantageous, with Audax one of the first private equity entrants in GI physician practice management as a result of its early 2016 investment.

OMERS Private Equity is buying Gastro Health from Audax Private Equity at an enterprise value of around $950 million, according to sources familiar with the deal terms. 

The private equity investment arm of OMERS, the Canadian pension plan, announced Wednesday an agreement to buy Gastro Health, a Miami-based gastroenterology physician practice management company. 

The deal concludes a Moelis-run sale process that kicked off earlier this year, with the bank originally engaged at the start of 2020 ahead of the pandemic, PE Hub previously reported. 

At a mid-$900 million valuation, the deal equates to a mid-teens EBITDA multiple. Some of the sources said the deal was valued at 16x-plus EBITDA. Although, the marketed $65 million in LTM adjusted EBITDA equates to a slightly lower multiple.  

Being a first-mover is proving to have its advantages. Audax, which recapitalized the business five years ago, was one of the first private equity entrants in GI physician practice management. The firm is now set to generate a more than 3x money multiple, some of the people said. 

Under the Boston-based private equity firm, Gastro Health has expanded significantly, growing its affiliations to more than 150 locations, according to its website – up from 21 at the time of its 2016 recapitalization.  

Supporting groups in Alabama, Florida, Maryland, Ohio, Virginia and Washington, and with over 250 physicians, Gastro Health is one of the fastest-growing gastroenterology platforms in the country, the Wednesday news release said. 

Besides space for continued growth through consolidation and ancillary services, Gastro Health has proven its ability to successfully expand outside of its Southern Florida roots – a strategy that likely appealed to bidders in the process, sources have said. 

Gastro Health physicians and advanced practitioners specialize in the treatment of gastrointestinal disorders and nutrition and digestive health, offering a range of ancillary services, including colorectal and general surgery, in-house infusion, diagnostic services and pharmacy services. 

While Audax was one of the first to invest behind the specialty, a number of sponsors have since flocked to GI. 

Waud Capital and Frazier Healthcare Partners both entered the segment in 2018 via deals for Texas Digestive Disease Consultants and United Digestive (formerly Atlanta Gastroenterology Associates), respectively.

In 2019, Amulet Capital Partners formed a new management services organization called US Digestive Health, marrying three southeast Pennsylvania gastroenterology groups in a transaction valued at approximately $130 million, PE Hub wrote. Varsity Healthcare Partners later that year invested in Peak Gastroenterology Associates, Colorado’s largest gastroenterology practice group.

In the midst of the coronavirus-inspired economic slowdown, Webster Equity Partners in April 2020 launched a new gastroenterology platform, One GI, clinching an all-equity deal for Tennessee’s Gastro One.

For Audax, the deal is its second big PPM exit in recent weeks. 

Partners Group earlier this month agreed to acquire Audax’s majority stake in Axia Women’s Health, a provider of non-clinical services in the women’s healthcare market. The deal, which has not closed, commanded a total enterprise value of just below $800 million, a source familiar with the matter told PE Hub.

OMERS, Audax and Moelis declined to comment.