Driven by regulatory efforts, market forces, and major structural changes, growth and consolidation has dominated U.S. health care for more than a decade.
From hospital systems and insurance providers to physician practices ranging from dermatology to dentistry, all corners of the health care market are experiencing investment and buyouts, with more and more large superregional and national platforms being established. Gastroenterology is very much part of this trend.
Investment in the gastro sector is not new, with private equity’s interest in this specialty beginning in 2016 and accelerating in the years since. Seven of the 10 “platform” entities that PE firms are using to focus their investments were established after May 2019 and in 2021 more than 10 individual gastro deals were concluded. Truly this market is becoming increasingly active and competitive.
Gastroenterology practices share many characteristics with other physician specialties that have also experienced waves of consolidation. For example, there is significant fragmentation throughout the U.S., coupled with imbalances between provider supply and patient demand.
Private equity buyers are eager to acquire the consistent cash flow and growth potential that specialty practices like gastroenterology can provide. During a time of uncertain investment returns all of us at Physician Growth Partners expect this interest to continue to increase.
Michael Kroin and Ezra Simons founded Physician Growth Partners (PGP) in 2017 to proactively advise and advocate for practice groups exploring a sale to PE investors. Gastroenterology practices that partner with private equity can scale their operations to effectively compete with large hospitals while unlocking new growth opportunities, maintaining clinical excellence, and ensuring that physicians retain ownership, which is the key to autonomy.
Our team has successfully guided several gastroenterology practices through the private equity process. There are several steps that we take to ensure successful outcomes for our clients, these include:
- Develop the appropriate financial modeling to position maximized cash flow and “credit” for ongoing initiatives that are driving growth
- Determine the right mix of potential buyers (including both strategic acquirers and private equity groups) and implement a strategy to reach them
- Managing buyer marketing, bid solicitation, and negotiation
- Position the client to meet relevant potential buyers with strong offers that address cultural fit, strategy, and alignment
- Manage the transaction process to maximize leverage with potential buyers
- Negotiate key economic and structural deal terms, leveraging PGP experience within the gastro specialty
- Facilitate all due-diligence pre-closing to ensure a seamless process that does not take away from the day-to-day business while ensuring the highest probability for a successful close
- Maximize financial results for shareholders while maintaining clinical autonomy