Driven by regulatory efforts, market forces, and major structural changes, growth and consolidation has dominated U.S. health care for more than a decade.
All sectors of the health care market are experiencing investment and buyouts, with more and more large superregional and national platforms being established. Orthopedics is very much a growing part of this trend.
Investment in the orthopedic sector is not new but private equity’s interest in this specialty area gained traction during 2021 with five major deals in the 4th quarter alone. Buying activitiy has only accelerated since, with 15 large transactions completed as of October 2022.
Orthopedic practices share many characteristics with other physician specialties that have experienced successful consolidation waves. For example, there is significant fragmentation, coupled with imbalances between provider supply and patient demand, and increasing costs associated with the facilities, equipment and operational tools necessary to be competitive.
As of 2022 there are just over 15 PE-backed orthopedic platforms making investments around the U.S. Activity is especially strong in the MidAtlantic, SouthEast and Texas. Private equity buyers are eager to acquire the consistent cash flow and growth potential that specialty practices like orthopedics can provide. During a time of uncertain investment returns all of us at Physician Growth Partners expect this interest to only increase.
Our team has successfully guided several orthopedic 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 orthopedic 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