sdr-uyfpxh6dk.netdna-ssl.com...11/13/2013 babar enterprises, llc agility health, inc. (tsxv:ahi)...

Securities offered through Colorado Financial Service Corporation. Member: FINRA-SIPC. SDR Ventures and Colorado Financial Service Corporation are separate entities

1

│ │

Q4 2013 saw a slight uptick in M&A activity in the US healthcare industry. The trend is expected to continue for the duration of

the year, though not without some fits and starts. The challenges facing Healthcare CEOs and CFOs in the coming year will be

many and diverse as the industry continues to work through the uncertainties still present in the marketplace. The stuttering

start of the HelathCare.gov rollout and the continuing trickle of regulatory rulings coming from HHS are indications that the

industry may not yet have the clarity that much of the marketplace expected to have by the New Year. In any event,

shareholders seem to be growing impatient with the amount of sidelined capital as evidenced by how far the index trailed the

broader market in Q4. Nimble executives will need to find ways to manage the transition of their current portfolio away from

the old volume based fee for service model to the new value based healthcare paradigm. In addition, they need to be ready

to make swift decisions on which operating units and businesses to keep, which to exit, and which to acquire. This bodes well

for the lower middle market, and is evidenced by the deal count and trend line in value of invested capital seen in 2013. We

expect to see deal value to rise as horizontal consolidations continue, and deal count to rise as vertical integration becomes

one of the last cost control measures available to CEOs requiring rapid structural change.

If you have any questions please contact us.

- Chris Bouck, Principal - Travis Conway, Director

TRANSACTIONS # BY SEGMENT (Q4)

STRATEGIC VS. FINANCIAL TRANSACTIONS HIGHLIGHTS

STRATEGIC ACQUISITIONS

12.2.13

12.4.13

12.16.13

Local Staff acquired the operating assets of Allied Healthcare Staffing division of On Assignment Staffing for $3.6 million. Kitara Media Corp acquired Health Guru Media for $16.7 million from a group of investors. US Physical Therapy acquired 90% of ARC Physical Therapy for $36 million. ARC reported $11.5 million revenue FY ‘12.

FINANCIAL ACQUISITIONS

10.16.13

Francisco Partners Management signed a definitive agreement to acquire McKesson Automation from McKesson Corporation (NYSE:MCK) for $52 million.

295

211

119

19

0 50 100 150 200 250 300 350

Providers & Services

Equipment & Supplies

Technology

Laboratory Services

Undisclosed 39%

Strategic 41%

Financial 20%


2

│ │

US HEALTHCARE M&A ACTIVITY

HEALTHCARE TRANSACTIONS # OF TRANSACTIONS BY QUARTER

Date Target Buyers Transaction Comments

10/16/2013 Aesynt Francisco Partners Management LLC

Francisco Partners Management signed a definitive agreement to acquire McKesson Automation from

McKesson Corporation (NYSE:MCK) for $52 million on October 16, 2013. Post acquisition, McKesson

Automation w ill operate under a new name. The transaction is subject to customary closing conditions.

11/08/2013 Vantage Health Inc. (OTCBB:VNTH) Nanobeak Inc.

Nanobeak acquired 81.7% stake in Vantage Health (OTCBB:VNTH) from Bayview Terrace Limited on

November 4, 2013. Under the terms of agreement, Nanobeak issued 0.5 million shares in exchange of 112

million shares of Vantage Health, representing 81.7% stake in Vantage Health.

12/19/2013 Endoscopic Technologies, Inc. AtriCure, Inc. (NasdaqGM:ATRC)

AtriCure (NasdaqGM:ATRC) signed an agreement to acquire Endoscopic Technologies (Estech) from a group

of shareholders for $61 million on December 19, 2013. AtriCure w ill make an up-front payment of $34 million

in $2.1mm of AtriCure common stock and up to $26 million in additional consideration based on achievements.

10/09/2013 Imperium Health Management, LLC Almost Family Inc. (NasdaqGS:AFAM)

Almost Family (NasdaqGS:AFAM) acquired 61.5% stake of Imperium Health Management for $5.8 million on

October 9, 2013. $3 million w ill be retained by Imperium for general corporate purposes. The transaction

allow s for additional investments to be made by Almost Family to fund Imperium's development.

10/16/2013 Campbell Clinic Surgery Center-Midtow n Campbell Clinic Inc.Campbell Clinic acquired Midtow n Surgery Center for $3.2 million on October 15, 2013. In conjunction w ith

acquisition, Campbell Clinic has taken a loan of $3.2 million through Magna Bank.

11/04/2013One Senior Living Community Located in Milford,

MassachusettsCapital Senior Living Corp. (NYSE:CSU)

Capital Senior Living (NYSE:CSU) acquired a senior living community located in Milford, Massachusetts for

$15.8 million on November 4, 2013. The transaction w as financed w ith $11.9 million of non-recourse 10-year

mortgage debt from Fannie Mae w ith the balance of the acquisition price paid from cash.

11/05/2013 SunCrest Healthcare, Inc. National Health Industries, Inc.

National Health Industries signed a definitive agreement to acquire SunCrest HealthCare for $75.5 million in

cash on November 4, 2013. The purchase price is subject to a w orking capital adjustment. For the year

ended December 31, 2012, SunCrest reported revenues of $150.5 million.

11/13/2013 Babar Enterprises, LLC Agility Health, Inc. (TSXV:AHI)

Agility Health (TSXV:AHI) acquired Excel Sports & Physical Therapy for $3.1 million on November 13, 2013.

$1.75 million is in cash and $1.89 million restricted voting common shares of Agility Health. Agility w ill pay the

vendors any AR that are collected in excess of $0.350 million w ithin the f irst 11 months follow ing closing.

-

20,000

40,000

60,000

80,000

100,000

120,000

0

500

1000

1500

2000

2500

3000

2009 2010 2011 2012 2013

Deals Capital Invested

308

516 658

577 577

375

535 635 608 598 606

777 828

611 600 519

721 645 694

622

0

200

400

600

800

1000

2009 2010 2011 2012 2013

Q1 Q2 Q3 Q4

Source: CapIQ

Source: CapIQ

Tra

nsa

ctio

ns

Clo

sed


3

│ │

Publicly traded healthcare stocks continued the trend seen throughout the year with valuations slightly trailing the broader

S&P. R&D and healthcare technology (HIT) companies have received the most generous valuation multiples from investors as

investment dollars seem to be chasing innovation. Hospital and clinical systems have rarely put up multiples that are

competitive with pharma, R&D, and HIT. However, the year ahead may signal a shift in this pattern as delivery systems increase

their focus on vertical integration, picking up industry innovators in the process and cost controls built in to ACA begin to

clamp down on the more profitable, but less certain outcomes that accompany research based or speculative business models.

Successful companies will be marked by agility and flexibility benefiting the quick decision making and the quick execution of

smaller companies; although the low tolerance for risk may mitigate this advantage. With all of the changes coming down the

pipe, quick identification and speedy response to new challenges will determine success regardless of the size of a business.

HEALTHCARE INDUSTRY VS. S&P 500 RUNNING 12 MONTHS

Market Cap Stock Price Price/ Price Price/ Price/

Company Name Symbol State ($ in Mil) (Date) Monthly YTD LMT EPS Book Sales EBITDA

MedAssets, Inc. NasdaqGS:MDAS GA 1,144.62$ 19.25$ 4.22% 14.79% 67.6x 2.6x 3.2x 10.4x

PharMerica Corporation NYSE:PMC KY 413.59$ 14.00$ (2.30%) (1.69%) 10.6x 0.9x 0.4x 6.9x

Analogic Corporation NasdaqGS:ALOG MA 967.28$ 79.02$ 6.51% 6.35% 33.0x 2.1x 1.5x 12.4x

AtriCure, Inc. NasdaqGM:ATRC OH 165.50$ 7.92$ (10.81%) 14.78% NM 10.7x 2.3x NM

Edwards Lifesciences Corp. NYSE:EW CA 9,406.50$ 82.16$ (4.39%) (8.88%) 38.2x 6.3x 4.8x 19.5x

Mindray Medical International LimitedNYSE:MR NA 4,752.86$ 39.94$ 6.20% 22.14% 35.4x 3.6x 3.8x 17.4x

Cardinal Health, Inc. NYSE:CAH OH 22,814.08$ 66.81$ 3.42% 62.24% 18.7x 3.6x 0.2x 9.5x

AdCare Health Systems Inc. AMEX:ADK GA 58.65$ 4.00$ (9.48%) (15.77%) NM 2.8x 1.1x 12.0x

Emeritus Corp. NYSE:ESC WA 1,278.15$ 27.79$ (2.46%) 12.42% NM 6.0x 3.8x 20.8x

Lifepoint Hospitals Inc. NasdaqGS:LPNT TN 2,275.10$ 48.46$ 9.91% 28.37% 15.0x 1.1x 1.2x 7.4x

Alliance Healthcare Services, Inc. NasdaqGM:AIQ CA 80.58$ 7.77$ 10.37% 21.79% NM NM 1.4x 4.3x

CorVel Corporation NasdaqGS:CRVL CA 535.68$ 24.75$ 3.02% 10.39% 22.4x 4.9x 1.2x 9.2x

National Research Corp. NasdaqGS:NRCI.B NE 399.49$ 16.52$ 1.63% 6.65% 29.0x 7.0x 4.7x 14.7x

Omnicare Inc. NYSE:OCR OH 4,260.87$ 40.72$ 9.29% 12.80% 16.7x 1.2x 0.9x 8.3x

Magellan Health Services Inc. NasdaqGS:MGLN CT 1,284.74$ 47.57$ (7.74%) (2.92%) 11.2x 1.3x 0.3x 4.5x

WellCare Health Plans, Inc. NYSE:WCG FL 2,504.78$ 57.96$ 1.35% 19.04% 13.7x 1.9x 0.2x 4.9x

Average 3,271.40$ 36.54$ 1.17% 12.66% 26.0x 3.7x 1.9x 10.8x

Stock Price Change

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

% C

han

ge f

rom

Pre

vio

us

Mo

nth

C

lose

Pri

ce

Healthcare Industry S&P 500 IndexSource: CapIQ

Source: CapIQ


4

│ │

HEALTHCARE SEGMENTS VS. S&P 500 RUNNING 12 MONTHS

Market Cap Price/ Price/ Price/ TEV/

Segment Averages ($ in Mil) Month YTD LTM LTM EPS Book Sales EBITDA

Healtcare Providers and Services 5,521.91$ 0.5% 42.5% 42.5% 48.43x 5.08x 4.66x 23.56x

Healthcare Equipment and Supplies 3,423.81$ 0.9% 8.8% 8.8% 45.10x 5.04x 5.74x 21.87x

Laboratory Services 2,849.35$ (11.2%) (8.1%) (8.1%) 51.32x 2.26x 1.47x 6.43x

Healthcare Technology 2,005.71$ (1.5%) 48.7% 48.7% 54.48x 6.05x 8.38x 67.82x

Industry Average 4,061.83$ 0.6% 24.5% 24.5% 39.14x 4.46x 4.34x 20.50x

S&P 500 Average 34,426.18$ 2.4% 29.6% 29.6% 27.25x 5.04x 3.06x 11.96x

Stock Price Change

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

% C

han

ge f

rom

Pre

vio

us

Mo

nth

-En

d

Clo

se P

rice

Healthcare Providers and Serives Healthcare Equipment and Supplies Laboratory Services

Healthcare Technology S&P 500 Index

Source: CapIQ

Source: CapIQ


5

│ │

COMPANIES BY REGION HEALTHCARE COMPANIES BY REGION AS OF DECEMBER 31 2013

COMPANIES BY SIZE

State Not

Disclosed $ 0 - 5

Revenue $5 - 10

Revenue $10 - 25 Revenue

$25 - 50 Revenue

$50 - 100 Revenue

$100+ Revenue

AZ 281 30 58 44 7 2 6

CO 288 19 60 47 11 4 9

KS 218 7 39 30 5 4 2

ND 62 1 4 11 1 0 2

NE 137 12 28 29 3 1 11

NM 82 3 12 13 0 1 1

OK 199 20 45 33 10 1 12

SD 52 4 15 10 2 1 0

TX 111 17 18 14 7 3 5

UT 130 17 34 21 11 1 4

WY 31 0 4 1 1 0 1

*Revenue in millions

Southwest, 12%

West Coast, 22%

Northeast, 11%

Great Lakes, 10%

N/A, 9%

Mountain, 10%

Southeast, 26%


6

│ │

CAPITAL STACK

US MIDDLE MARKET M&A ACTIVITY

TRANSACTION MULTIPLES EBITDA MULTIPLES BY TRANSACTION SIZE

0%

20%

40%

60%

80%

100%

2008 2009 2010 2011 2012 2013

Equity Sub Debt Senior Debt

0

10

20

30

40

50

60

70

0

200

400

600

800

1000

1200

1400

1600

Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

Deals Closed Capital Invested

4.8x 4.9x 5.1x 5.0x 5.9x 6.0x

5.2x 6.4x

7.2x 8.0x

10.9x 9.4x 9.1x 9.1x

10.8x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013

$0-25mm $25-250mm $250mm+

Source: PitchBook

Source: PitchBook

Cap

ital Inve

sted

(in $

Mil)

Tra

nsa

ctio

ns

Clo

sed


7

│ │

Chris Bouck Principal – Healthcare Team p: 720.221.9220 e. [email protected]

TRANSACTION ADVISORY

Buy Side Running a proven process effective at generating responses, identifying “off-the-radar” opportunities, negotiating and closing accretive acquisitions. Sell Side Our process is designed to identify the “right” buyer and maximize shareholder value for our clients.

CAPITAL FORMATION

Private Capital Placement An effective and efficient process negotiating favorable debt and equity with the right capital partner for our clients

Address Website Phone 5613 DTC Parkway, Suite 820 │ Greenwood Village, CO 80111 www.sdrventures.com 720.221.9220

Travis Conway Director - Healthcare Team p: 720.221.9220 e. [email protected]

sdr-uyfpxh6dk.netdna-ssl.com...11/13/2013 babar enterprises, llc agility health, inc. (tsxv:ahi)...

Documents