EDGEMONT CAPITAL BLOG

Strong Healthcare Sectors to Watch

Recent efforts to repeal and replace the Affordable Care Act have been met with a lot of angst. So far, the impact has been small and the election did not tonally upend buyer confidence in the sector. The shift from fee-for-service to value-based care requires greater coordination and continues to favor strategic acquisitions.

Healthcare M&A surged to record highs in 2017, with 115 transactions. Here are the hottest sectors on the market right now.

Autism Care
Behavioral health has surged in general over the past year. As insurers fight the ACA mandate on behavioral health care, the growth opportunities persist. Autism awareness in particular has led to more money pouring into the sector. There is more funding and more utilizations. Providers once served children in elementary school, but now services begin in toddlerhood, and extend into a person’s twenties.

Blackstone announced in April that it would acquire the Center for Autism and Related Disorders (CARD). It’s a powerful signal to the marketplace about where autism services sit. These services are gaining valuations at multiples of 10 or greater—even among small providers with earnings of less than a million.

Eye Care Services
Private equity has been very active in physician practice management, particularly eye care and ophthalmology. They’ve turned highly fragmented businesses into successful exits. Eye care in particular has seen an explosion and is currently a $36 billion industry with forecasts projecting nothing but growth. There are approximately 20 private equity groups acquiring eye care businesses each year.

Private equity can reduce the cost of practicing health care as they offer the capital and scale necessary for acquisitions, support efficiency, and offer analytics and insights that most doctors lack. Doctors can be amazing executives/owners and excellent physicians, but they can rarely be both. PE fills this gap.

As the population ages, the demand for vision services will only increase. With a projected ophthalmologist shortage of 30%, we may be looking at a coming boom in this valuable industry.

Remote and Telehealth
Digital health, especially remote telehealth monitoring, may be the hottest sector of all. The shift from fee-for-service to value-based care has really driven this opportunity. Hospitalization tends to be the most expensive thing that can happen in healthcare, not to mention the worst. A wave of digital health firms are attempting to prevent needless hospitalization and focus on home-based care.

We’ve also seen significant growth in mobile health. Together with telehealth and remote monitoring, these approaches to healthcare address patient needs, and often enable them to affordably exit managed care systems. Preliminary research suggests they may also offer better healthcare outcomes. That’s an all-around win that will continue to fuel M&A fire in this sector.

About Edgemont Capital Partners
Edgemont Capital Partners is a specialist healthcare investment banking firm providing the highest level of mergers and acquisitions advisory services founder-owned and entrepreneur-run healthcare and life sciences companies in the lower middle and middle markets. Our world class transaction expertise is a result of our extensive and proven track record of success. We have advised on over 125 transactions representing more than $35 billion in combined value.