We call the Laboratories, MRI and Dialysis sector our grab-bag sector, and it seldom makes much noise. Diagnostic laboratories, radiology, and dialysis providers comprise this sector. Last year, there were only 48 deals announced, according to our Deal Search Online database, and the first quarter of 2019 reported only 11 deals, a 47% decrease from the same quarter in 2018. It hit a high of 56 deals in 2017.
However, the sector seems to have picked up in the second quarter this year. The deal count caught up and we’re now at 24 deals, roughly equal to last year’s pace. But that’s not all. Last year, there was $1.68 billion in announced prices. This year we already have $1.73 billion in announced prices. It may not seem like much, but for a sector that’s often low on spending or announced prices, that’s nothing to scoff at. Trends are difficult to discern in this sector, since each particular target company may have no relation to each other. However, we’re not totally blind here. Lab, MRI, and Dialysis groups have been a majority of the buyers, accounting for nearly 46% of all deals this year, meaning it’s a sector driven by consolidation.
Much like some of the other services sectors, such as behavioral health or rehabilitation, private equity is grabbing their own stake. In mid-February this year, a private investor group composed of Bain Capital Private Equity, Summit Partners, Revelstoke Capital Partners, and Mark Caputo invested in U.S. Renal Care, Inc. for an undisclosed price. The company provides in-center and at-home hemodialysis, as well as at-home peritoneal dialysis services, to 25,000 patients in 335 dialysis facilities in 32 states and the Territory of Guam. Earlier this month, Morgan Stanley Capital Partners acquired Ovation Fertility from WindRose Health Investors in a recapitalization process. WindRose had been a majority investor since June. Ovation Fertility provides fertility laboratory services, including in-vitro fertilization laboratory services (IVF), genetic testing, egg & embryo storage and other services for the fertility industry.
It was a medical device company that made the biggest push into the sector, at least as far as we know. PHC Holdings Corporation, a global healthcare company that develops, manufactures, sells and services medical equipment, acquired the anatomical pathology business from Thermo Fisher Scientific for $1.14 billion. The target business generates an approximate $350 million in revenue annually. PHC hopes to expand to its business portfolio in this deal.
As the second quarter draws to a close, we’re optimistic the deal count will hit the same as last year, but dollar volume seems promising. After a slow first quarter, the activity is finally picking up, and the Laboratories, MRI and Dialysis sector might finally be rising as well.
