One Equity’s American Medical Technologies unites with RestorixHealth

The marriage of the two wound care companies comes as the US's diabetes problem, positive reimbursement dynamics and increasing demand across post-acute care settings present a favorable backdrop for growth.

 

Brad Coppens, One Equity Partners. healthcare, private equity
Brad Coppens, One Equity Partners

One Equity Partners’ American Medical Technologies is joining forces with RestorixHealth, creating one of the largest and most comprehensive wound care players in the US. 

The transaction, which has not yet closed, is set to provide an exit for Leonard Green & Partners, which bought Restorix in September 2015. Cressey & Co will also exit its minority investment.

Guggenheim Partners advised Restorix on the transaction, while Regions and Truist Securities provided financing to support the acquisition.

Brad Coppens, senior managing director at OEP, told PE Hub that, in buying Restorix, AMT was gaining access to a much broader suite of physician services including hyperbaric oxygen therapy and wound debridement, while also entering new care settings – “most notably a leading position in outpatient wound care clinics, as well as a rapidly growing footprint in the home”. 

AMT provides advanced wound care supplies and services predominantly to skilled nursing facilities (SNFs), as well as to assisted living and hospice settings. The Irvine, California-based business also offers ostomy, urology and tracheostomy supplies and services. 

Restorix, conversely, provides services across 236 outpatient wound care clinics in partnership with hospitals across 32 states. It also offers in-home wound care durable medical equipment and physician service capabilities across two states. Steve McLaughlin, CEO of the White Plains, New York-based company, will become CEO of the combined business upon completion of the deal.

Having worked on AMT for nearly two years prior to its initial August acquisition, OEP was well aware of Restorix when it initially came to market pre-covid. Restorix, after taking a pause, restarted its process around late summer.

The New York mid-market firm sees robust opportunity in the sector for a number of reasons. Coppens said the prevalence of obesity and diabetes are fueling growth in wound care management in the long run, and that this would ultimately create demand for wound care as chronic wounds are a common co-morbidity.

Recent reimbursement changes also bode well for AMT. “Reimbursement structures in long-term care [PDPM in SNFs and PDGM in home health] are now focused on diagnosis rather than utilization, which means greater clinical complexity and higher acuity cases will garner enhanced reimbursement,” said Coppens. 

“[Payors and other post-acute providers] are now focused on outsourced solutions to address wound care cases in both of those settings – our company being the obvious solution.”

AMT has been remarkably stable through covid, Coppens noted, explaining that the business provides services to patients who are too medically frail to be cared for at home. 

More dealmaking is likely to be on the cards, he concluded: “Once we integrate the two businesses we do intend to stay active on the M&A front with a prioritization of leveraging Restorix’s fast-growing and innovative offerings in the home.”

AMT’s momentum and growth trajectory are in stark contrast to the ongoing challenges faced by its largest competitor. Healogics, purchased in 2014 by Clayton, Dubilier & Rice in a $910 million LBO, has unsustainably high leverage, with 10.2x Moody’s-adjusted debt-to-EBITDA, the ratings agency said in December. It added that operating pressures – including significant exposure to hyperbaric oxygen treatment and declining clinic volume – had constrained Healogics’ ability to reduce leverage to a more manageable level ahead of its need to address its 2021 debt maturities. 

Likewise, S&P Global Ratings in December concluded that “the risk of an event of default over the next six months is elevated”.

Healogics in 2018 also agreed to pay up to $22.51 million to settle a False Claims Act liability for improper billing of hyperbaric oxygen therapy.