PE interest in Orthopedics has picked up momentum in 2022 with transaction volume increasing. However, these are still the ‘early-innings’ of private equity investment compared to other healthcare specialties. With a mixture of provider fragmentation, high infrastructure costs (surgical hospitals, imaging, etc.), and profitable ancillary services, the Orthopedic market continues to show signs of successful consolidation.
There are just over 15 PE-backed Ortho platforms operating nationally, so groups are still looking to capitalize on first-mover advantages, especially in untouched cities and regions. This year we have seen healthcare-focused private equity that is successful in other sectors (Shore Capital, Archimedes Health) make their Ortho platform entry, with more expected. Additionally, United Musculoskeletal Partners merged with Novum Orthopedic Partners in a race to establish a national presence.
The current activity (despite the state of capital markets) indicates continued and accelerated activity, specifically in terms of add-on acquisitions by strategic acquirers. PGP advised on two Orthopedic transactions this year and expects to close two more before the end of 2022. With new Ortho platforms being announced regularly, we expect an increase of add-on transactions as existing groups look to capture market share and expand into untapped geographies.
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