The Rehabilitation sector is still fairly fragmented, but consolidation is coming. Some 40 deals have been announced in 2016, a 21% increase compared with 2015’s then-record of 33 deals. This year saw a ramp-up in the number of deals announced by REITs and private equity firms, too.
Spending in this sector is generally lower than other sectors, because so many transactions are made by local or regional buyers who want to keep deals private. Many targets are privately owned, and sellers don’t wish to disclose prices, either. In 2016, deal value was approximately $712 million, down 11% compared with 2015’s $799 million. For this sector, those figures represent healthy spending levels.
Private equity firms have been attracted to this sector for some time, and six deals were announced by some well-known firms, including Advent International, Audax Group, Gryphon Investors and Waud Capital Partners. The latest deal was announced on December 19, as Thomas H. Lee Partners acquired Professional Physical Therapy, LLC (aka ProPT) from Great Point Partners for an undisclosed price.
Professional Physical Therapy was founded by three physical therapists in 1998. Since Great Point Partners acquired it in 2011, the company grew from 10 locations to 107. Just this year alone, GPP announced six acquisitions of physical therapy clinics and chains. Aggressive platform-building, for sure.
ATI Physical Therapy, which made four acquisitions in 2016, was itself acquired in March by Advent International. KRG Capital exited ATI, having built it to a platform with more than 500 clinics in 19 states. The company served nearly 300,000 unique patients in 2015.
Three REITs made five deals with rehabilitation companies. The most aggressive was Global Medical REIT (NYSE: GRME), which announced three deals on November 30, for a total of $68 million. The targets were all inpatient rehab hospitals operated by HealthSouth Corporation (NYSE: HLS), but owned by affiliates of Healthcare Realty Trust Incorporated (NYSE: HR). Two facilities are in Pennsylvania and one is in Arizona.
The usual players were busy, also. U.S. HealthWorks, a subsidiary of not-for-profit Dignity Health, announced four acquisitions, and U.S. Physical Therapy (NYSE: USPH) announced three.
