Noteworthy M&A Transactions – November 2018

DEC 19
November 2018 M&A activity highlighted continued momentum on several compelling themes:
  1. Rising Homecare and Post-Acute Interest. Starting in 2019, Medicare Advantage plans will begin covering non-skilled in-home care services as a supplemental benefit. This regulatory tailwind combined with the increased movement of care into the home has created favorable market conditions. In preparation, investors and large homecare providers have seen the opportunity and have begun to invest.  Post-acute care providers are looking to expand and fill holes in their service offerings while larger healthcare technology organizations are trying to find a position in the market through the acquisition of specialized post-acute technology.
  2. Continued Investment in Behavioral Health. The past few months have seen increasing consolidation within the Behavioral Health market, and this trend is continuing. Nearly one in five U.S. adults live with mental illness, and the increased diagnosis and appreciation of behavioral health issues has led to an expanding patient base in these behavioral health centers. Supported by a strong regulatory and reimbursement push, providers are targeting M&A as a means of quickly capitalizing on the current market conditions, and investors continue to pour money into the market.
  3. Healthcare Diversification of Large Retail Players. In a previous blog, TripleTree commented on the impact of vertical integrations across healthcare, including the Amazon/Berkshire Hathaway/JPMorgan collaboration.  As Amazon’s strategy in healthcare begins to unfold, including the recent acquisition of PillPack, traditional retail players are looking to continue expanding into healthcare as a means of diversification and lowering costs for consumers. Throughout the past month, large retail chains have acquired or have started negotiating acquisitions in the healthcare space, creating unique opportunities in brick and mortar locations and online distribution platforms. The belief is that through these acquisitions, healthcare can become more local, accessible and affordable and ultimately protect retail players from a continuously shrinking market share.
  4. Flurry of Specialty EHR Transactions Continues. The specialty EHR environment continued to thrive in November 2018 with two high-profile transactions announced with ResMed’s acquisition of MatrixCare, and Veritas Capital and Elliot Management’s acquisition of Athenahealth. These are the latest transactions in a flurry of activity we’ve seen in this space over the past 18 months as investors and strategic acquirers look to partner with market-leading platforms in the “less mature” EHR segments (e.g., ambulatory/physician specialty, post-acute, and behavioral health).
Several transactions announced in November align with these themes:
  • ResMed, a provider of medical devices and cloud-based software designed to diagnose, treat and manage respiratory disorders, announced that it has signed a definitive agreement to acquire MatrixCare for $750 million. MatrixCare is a leading provider of long-term post-acute care software, serving 15,000 providers across skilled nursing, life plan communities, senior living and private duty. The purchase price of $750 million represents 25x EBITDA of $30 million in 2018.
  • Family Resource Home Care and Family Home Care, two of Washington state’s largest and most-established home care agencies announced the completion of a merger that will make the combined entity one of the largest home care providers in the nation. The new entity will retain the Family Resource Home Care name and will serve more than 1,000 clients and their families.
  • Pharos Capital Group, through its Family Treatment Network, acquired ABA of North Texas (ABANT), an outpatient autism services provider based in Plano, TX. ABA of North Texas provides behavioral services for children and adolescents with autism and other developmental disabilities. The Family Treatment Network is a complementary platform of child and adolescent behavioral health services businesses, including residential therapy centers, therapeutic day schools, home and community-based outpatient programs, and other child and adolescent psychiatric treatment services.
  • Capital Education Group, a provider of behavioral health services and private school programs for children with autism and other specialized learning needs, has been acquired by Catapult Learning, a provider of special education and instructional intervention solutions. Catapult’s team of over 5,000 educators works to achieve sustained academic gains and build teacher and leadership capacity through evidence-based programs.
  • CVS Health finally closed on its acquisition of Aetna, creating a new healthcare powerhouse. The merger combines CVS' pharmacies with Aetna's insurance business, blurring traditionally distinct lines in hopes of lowering costs. The final deal valued Aetna at $212 per share, CVS said in a press release, or about $70B. CVS will now need to integrate Aetna and start trying to accomplish its three main priorities: making healthcare local and accessible, simplifying how consumers access care, and lowering costs.
  • athenahealth, a provider of network-enabled services for hospitals and ambulatory customers, has been acquired by Veritas Capital and Evergreen Coast Capital. Under the definitive agreement, an affiliate of Veritas and Evergreen will acquire athenahealth for $5.7B in cash. Following the closing, Veritas and Evergreen expect to combine athenahealth with Virence Health, the GE Healthcare value-based care assets that Veritas acquired earlier this year.

TripleTree and TT Capital Partners continuously monitor the market to identify the forces and themes impacting the healthcare industry.  Thanks for reading and as always, let us know what you think!

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Nick Palmer
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