Following increased deal volume in 2021, private equity has maintained a high deal volume throughout 2022, as well. Through the second week of October this year, private equity firms or their portfolio companies have announced 776 transactions. That equates to 40% of the deals announced in the entire year across all healthcare sectors. From January 1, 2021, through the second week of October 2021, private equity groups were responsible for 637 deals, or 38% of the 1,669 deals announced by the point. So, while the percentage of deals done by private equity has only slightly increased, the number of deals has risen significantly.
Private equity has shown great interest in the Physician Medical Groups (PMG) sector this year. According to data captured in LevinPro HC, private equity accounts for 338 out of the 483 PMG deals announced in the year, or 70%.
As PMGs have garnered a great deal of private equity interest, we want to highlight two companies with notable deals: Shore Capital Partners and Linden Capital Partners.
Shore Capital Partners, one of the most active investors, is a Chicago-based lower middle market private equity firm focusing on several industries, including healthcare. It partners with companies with between $5 and $100 million of revenue. Their portfolio companies include Brightview Health, Great Lake Dental Partners and Southern Ear Nose Throat & Allergy (SENTA) Partners. Year to date, Shore Capital has made 26 acquisitions through its portfolio companies, focusing on the PMG and Behavioral Health Care sectors.
Throughout 2022, SENTA has closed four acquisitions, purchasing South Carolina ENT, Allergy & Sleep Medicine, Allergy, Asthma & Immunology Associates of South Texas, ENT Carolina and Reston Ear, Nose and Throat. The acquisitions of these practices expand Shore Capital’s presence in Washington, D.C., North Carolina, South Carolina and Texas and add 28 physicians to its network.
Expanding its Rehabilitation portfolio, Shore Capital’s portfolio company, Therapy Partners Group (formally known as Golden Bear Therapy Partners), has acquired two clinics since the start of 2022: ProSport Physical Therapy & Performance and FIT Physical Therapy. Therapy Partners Group was formed by Shore Capital in 2019 and remains the company’s only rehabilitation organization.
While Shore Capital has been busy expanding its territory, the company has also made some recent divestments. In September 2022, Shore Capital sold one of its most active portfolio companies, EyeSouth Partners, an eye care management services organization with more than 155 locations, to Olympus Partners. Since its formation by Shore Capital in 2017, EyeSouth has made 30 transactions, five of them in 2022. It’s hard to predict what Shore Capital’s future investments or divestments will be, but we anticipate that the company will take on another eyecare organization as the ophthalmology/optometry subsectors are consistently one of the most active targets in the PMG market.
Florida Autism Center sold in 2020 to BlueSprig Pediatrics, Inc. which, in turn, is owned by KKR. Purchased by Shore Capital in 2015, Florida Autism Center provides Applied Behavior Analysis (ABA) therapy services treating children with autism spectrum disorder. With this transaction, Behavioral Innovations became Shore Capital’s leading Behavioral Healthcare company, allowing them to focus on growing the asset class.
Linden Capital Partners is also having a busy year. Based in Chicago, the PE firm focuses on leveraged buyouts in the healthcare and life sciences. Its portfolio includes Pinnacle Treatment Centers, Sage Dental and Smile Doctors, LLC., Linden Capital has made 16 acquisitions through its portfolio companies this year, focusing on the PMG sector while dipping its toe into other sectors like Behavioral Healthcare and Medical Devices.
In the beginning of January 2022, Thomas H. Lee Partners invested in Smile Doctors alongside Linden Capital to create a joint venture. Since then, Smile Doctors, an orthodontic dental support organization with more than 340 locations in 25 states, has made seven acquisitions. The practices purchased are Legler Orthodontics, Associated Orthodontists, Rothenberg Orthodontics, Farina Orthodontic Specialists, Lakes Orthodontics, Charleston Orthodontic Specialists and Copus Orthodontics. The acquisitions of these orthodontics practices expand Linden and Thomas H. Lee’s presence in Michigan, South Carolina, Minnesota, Florida and New Jersey.
Broadening Linden’s reach in the market, Pinnacle Treatment Centers purchased Stepping Stone of North Carolina in June 2022, the company’s only transaction so far. Pinnacle serves more than 35,000 patients in nine states with more than 125 locations.
As Linden expands its presence in the dental and behavioral health markets, the firm doesn’t seem to be divesting or selling many of its portfolio companies as frequently as other private equity firms.
Most recently, Linden sold ProPharma Group to Odyssey Investment Partners in 2022. Linden initially invested in ProPharma, a global provider of outsourced services to pharmaceutical, biotech and medical device companies, in 2016. Odyssey Investment Partners is currently investing out of its sixth fund, which has $3.25 billion in assets.
Another important healthcare transaction of Linden is its exit from Behavioral Centers of America (BCA) in 2012. BCA was sold to a subsidiary of Acadia Healthcare Company, Inc. We speculate that exiting BCA allowed Linden to invest in Pinnacle, even four years later.
As there has been a sustained interest in private equity acquisitions across all healthcare sectors, we believe that going further into the final quarter of the year activity will continue to remain strong.
