M&A activity for middle market companies (below $500 million of revenue) was active during the final quarter of 2016 after a sluggish first three quarters. There were less completed M&A transactions in 2016 than there were in 2015, but banks are still aggressively lending and there is still significant capital on balance sheets waiting to be deployed. The market outlook for healthcare M&A activity is very optimistic going into 2017 as the economy is poised for continued growth.

Below is a quick look at a couple notable middle market healthcare transactions across the United States that closed in the second half of 2016.

June 2016 –

CRH Medical Corp acquired a 65% majority stake in Community Anesthesia for US$13.6 million in cash. The transaction was funded through its existing syndicated credit facility with Scotiabank, U.S. Bank and cash on hand. CRH Medical Corp. provides physicians with innovative products for the treatment of gastrointestinal diseases. It focuses on physician education, patient outcomes and patient awareness. The company’s product, the CRH O’Regan System, is a single use, disposable, hemorrhoid treatment. Community Anesthesia provides anesthesia services. The company is headquartered in Brockton, MA.

September 2016 –

Envision Healthcare Holdings, Inc. acquired Lincoln Emergency Physicians, PLLC for US$42 million. The deal included the acquisition of Sonoran Emergency Physicians, PLLC. Envision Healthcare Holdings, Inc. offers an array of healthcare-related services to consumers, hospitals, healthcare systems, health plans, and local state and national government entities. The company provides and manages community-based medical transportation services, including emergency, non-emergency, managed transportation, fixed-wing air ambulance, and disaster response. Lincoln Emergency Physicians, PLLC provides medical services. The company is headquartered in Scottsdale, AZ.

September 2016 –

Family ER + Urgent Care acquired Texas Emergency Care Center for an undisclosed amount in cash. The transaction was financed through Dos Rios Partners, LP. The transaction is in line with the growth strategy of Family ER + Urgent Care. Premier One Emergency Centers, LLC operates emergency and urgent care centers. Texas Emergency Care Center provides emergency care services.

November 2016 –

NorthStar Anesthesia, PA, a portfolio company of TPG Growth, LLC, acquired River Cities Anesthesia, Inc. for an undisclosed amount. The transaction enhances NorthStar Anesthesia’s portfolio of anesthesia management services. Founded in 2001, TPG Growth, LLC is a private equity firm headquartered in San Francisco. River Cities Anesthesia operates as an anesthesia management company. It currently serves St. Mary’s Hospital in the Huntington, West Virginia area and Three Gables Surgery Center in Proctorville, Ohio. The company is headquartered in Huntington, WV.

December 2016 –

ALK-Abello A/S acquired Allergy Laboratories, Inc. and Crystal Laboratory, LLC from the same undisclosed private owner for US$20 million, on a debt and cash free basis. ALK-Abello A/S engages in the production and development of pharmaceutical products to prevent and treat allergies. It also manufactures tablet-based allergy vaccines for pollen, house dust mites, animals and insect stings. Allergy Laboratories, Inc. manufactures pharmaceutical products. It offers diagnostic testing and therapeutic treatment of allergies. The firm’s products include sterile vials, allergenic extract, diluent, dropper vials and pump bottles, allergy syringes and supplies, and skin testing devices. The company is headquartered in Oklahoma City, OK.

Private Equity Outlook

While 2016 M&A activity as a whole was down as compared to 2015, the private equity sector seems geared up to be active in 2017. There is still significant dry powder available and private equity groups are actively looking to deploy capital into good lower middle market companies with strong earnings. Private equity continues to be excited about healthcare related software/technology, emergency care, and drug development. Any businesses that have a strong component of recurring revenue are also highly interesting to private equity buyers.

Strategic Outlook

Similar to their private equity counterparts, strategic acquirers were not as active in 2016 as they were in 2015, but there is still significant capital on corporate balance sheets. The new administration should spur these companies to gain both market share and capabilities through strategic acquisition.
Each year brings new promise along with opportunities and 2017 should be an active year for mergers and acquisitions.