Noteworthy M&A Transactions – December 2019

JAN 29
December 2019 M&A activity highlighted continued momentum on several compelling themes:
  1. Gastroenterology Practice Consolidation. Investor interest continues to grow in the gastroenterology space. Supporting a favorable market environment in the increased prevalence of digestive issues as individuals age and increased utilization given the clear benefit to both patients and payers of early colorectal screening. We expect to continue to see platform investments and tuck-in acquisitions in this space as larger providers execute roll-up strategies.
  2. Substance Abuse and Mental Health Treatment – Pursuing a Niche. In an effort to differentiate themselves among the thousands of addiction treatment and mental health facilities operating in the U.S., many behavioral health treatment companies are pursuing M&A strategies to expand within a specific patient niche. We anticipate this theme will continue to play out with many providers looking to further develop their “brand” among specific patient groups.
  3. Focus on Specialty Pharmacy. With specialty drugs representing one of the fastest growing areas in healthcare, private equity groups and strategic acquirers are looking to capitalize on this growth opportunity by acquiring specialty pharmacy businesses. Supporting the growth opportunity is the combination of an increase in the diagnosis of chronic conditions and complex disease states, driven by better diagnostic tools and protocols, and an aging U.S. population that is more likely to develop these conditions. We expect consolidation of smaller independent specialty pharmacy providers to continue as private equity groups and strategic acquirers look to bolster their presence in this market.

Several transactions announced in December align with these themes:
  • Varsity Healthcare Partners announced the recapitalization of Peak Gastroenterology Associates, the largest provider of gastroenterology services in Colorado. Varsity is partnering with Peak’s physicians, all of whom remain significant shareholders, to expand the Company’s footprint across Colorado and Arizona, as well as additional states. Peak currently offers gastroenterology services across a network of 12 outpatient locations and 21 ambulatory and hospital-based endoscopy centers throughout Colorado.
  • GI Alliance, a portfolio company of Waud Capital and the nation’s largest independent gastroenterology services organization, has entered the Arkansas market through a partnership with GastroArkansas, the largest independent gastroenterology practice in the state. GI Alliance now supports over 315 gastroenterologists across six states.
  • Vizion Health, a provider of inpatient psychiatric, mental health, substance abuse, and eating disorder services, has acquired Shoreline Treatment Center, a 91-bed residential adolescent addiction treatment center. This represents Vizion’s fourth acquisition.
  • Newport Academy, a provider of mental health, eating disorder, and substance abuse treatment for adolescents, has acquired Residence XII, an all-female alcohol and chemical dependency treatment center. The 25-bed program expands Newport Academy’s presence in Washington state, where it has an existing facility serving an all-male population.
  • Humana announced the acquisition of Enclara Healthcare, a Consonance Capital Partners portfolio company. Enclara provides pharmacy solutions to simplify care delivery in complex care populations. Enclara will help Humana expand its care continuum strategy to support hospice pharmacy solutions, simplify the mail order pharmacy experience, and enhance its technology solution suite for in-home pharmacy services.
  • UnitedHealth Group announced the acquisition of Diplomat Pharmacy, a provider of specialty pharmacy and infusion services, for $300 million, or $4.00 per share. The deal includes the assumption of approximately $560 million in debt. Diplomat brings expertise in managing specialty medications that treat patients with complex diseases and provides specialized infusion therapies across the country. Diplomat will become a subsidiary of Optum, UnitedHealth’s pharmacy services unit.
  • Private equity firm Kinderhook Industries announced the majority recapitalization of Longs Drugs and PharMedQuest Pharmacy Services, providers of on-site and central fill pharmacy services to healthcare facilities that focus on indigent and underserved populations. Longs provides comprehensive pharmacy services for Ryan White Clinics, Federally Qualified Health Centers, and STD clinics, and distributes specialty pharmaceuticals across the United States. PharMedQuest provides on-site pharmacy management solutions to Federally Qualified Health Centers.
TripleTree and TT Capital Partners continuously monitor the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and let us know what you think!

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Shane Svenpladsen
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