M&A transaction activity in physician practice management remains robust, as 2021 established a new high watermark with ~450 closed M&A transactions, more than double the number of closed transactions in 2019. The M&A transactions involved a mix of (i) new platform investments and (ii) add-on affiliations with established platforms across an increasing range of physician sub-specialties, including dermatology, ophthalmology, cardiology, ENT, gastroenterology, urology, and women’s health, among others.
Investor interest in the orthopedic sector has accelerated over the past five years. Orthopedics is an attractive sector for investment due to its size, strong growth characteristics, fragmentation, cost inefficiencies, and the need for outside capital to invest in and develop ancillary services and outpatient facilities to enable coordinated care. The first platform investment in the sector was completed back in 2017. Currently, there are 17 private equity-backed platforms, seven of which have been completed since the beginning of 2020. While the number of platform investments has increased, significant whitespace remains for additional platform investments and add-on affiliations in the sector as the current private equity-backed platforms account for less than 3% of all independent board-certified orthopedic physicians in the U.S.
Already, M&A activity in 2022 is off to a strong start, with one additional platform investment and three add-on affiliations completed in January alone.
Nearly all the orthopedic M&A transaction targets have been independent physician-owned groups that have either established a new platform with a private equity investor or affiliated with an existing orthopedic platform. Given the recency of the orthopedic platform investments, there have been a limited number of exits completed to date. However, the growing population of physician practice management platforms in other sub-specialties that have completed multiple private equity-led recapitalization transactions is a positive indicator of a successful partnership between the physicians and investors, resulting in significant value creation for all shareholders.
Livingstone is a leading middle-market investment bank focused primarily on sell-side M&A advisory services. The firm’s dedicated senior healthcare team has unmatched M&A advisory experience within the physician practice management sector, having advised on the most transactions in the orthopedic sector. Over 80% of the healthcare team’s closed transactions have involved provider-focused businesses, and ~70% of all healthcare sell-side clients were founder-owned. Our healthcare team is highly experienced in completing physician practice management M&A transactions and has an unblemished track record in advising physician-owned practices to accomplish their objectives. We have compiled a report that summarizes our strategic insights on recent physician practice management M&A trends. Reach out to Olga to request the report.
If you are interested in starting a strategic dialogue with Livingstone and exploring how we can help you to accomplish your objectives, we encourage you to contact a member of our senior healthcare team.