Q3’16 Healthcare M&A Roundup

In Q3 ’16, TripleTree tracked 373 healthcare transactions that were either closed or announced but have yet to close. The number of transactions this quarter is in line with the previous quarter (we reported 369 healthcare transactions in our Q2’16 blog post).

The healthcare industry vertical remains an attractive area for private equity − Pitchbook cited that 15% of all 2016 private equity transactions have been within the healthcare industry. One such deal was Frazier Healthcare’s acquisition of Matrix Medical Network, in which TripleTree acted as the financial advisor for Matrix.

The average total enterprise value for the 373 transactions in Q3 was $120 million and the median value was $32 million.

One notable transaction for Q3 was EQT Partners’ acquisition of Press Ganey Holdings, taking the company from public to private; we have profiled the transaction below, along with a highly strategic move by Inovalon to acquire Creehan Holding Inc. to bolster its dataset and capability platform, and Evolent Health’s acquisition of Valence Health to expand its financial and operational scale.

EQT Partners’ acquisition of Press Ganey Holdings

Target Description

Press Ganey Holdings provides analytics to patients and caregivers to enhance the patient experience and improve clinical quality and safety. The Company’s analytics are driven off data collected directly from patients and caregivers, and produce insights into process flow, care reliability, and patient safety. Press Ganey serves more than 26,000 healthcare facilities and is based in Wakefield, Massachusetts.

TripleTree Perspective

Having gone public in May 2015, Press Ganey had been a public company for less than 18 months when EQT offered to acquire the company for $40.50 per share, less than a 1% premium to the previous day’s closing price. We see the $2.2 billion transaction as a way to capitalize on the transition to value-based care as patient satisfaction and quality of medical care play an increased role in reimbursement. There is deep value for healthcare providers to be able to identify inefficiencies and gaps in care that ultimately lead to lower profitability under the value-based care models.

Inovalon’s acquisition of Creehan Holding Inc.

Target Description

Creehan & Company provides specialty pharmacy and specialty medication management software for payers, PBMs, providers, and other pharmaceutical companies. The Company’s suite of products and services enable healthcare organizations to improve business processes, management of data, and collaboration among specialty pharmacy stakeholders. The Company is located in Canonsburg, Pennsylvania.

TripleTree Perspective

Inovalon has expressed a strategic interest in Specialty Pharma as an area to expand the Company’s analytical capabilities. Due to increasing number of patients with complex and chronic conditions (and the associated financial impact to payers under value-based reimbursement), the data within sectors such as Specialty Pharma is becoming increasingly more valuable. Creehan & Company’s ScriptMed platform is the industry leading solution for this market, and should broaden Inovalon’s offering to its clients with datasets tied to medication adherence, utilization, and patient-reported outcomes.

Evolent Health acquires Valence Health

Target Description

Valence Health provides value-based care solutions to hospitals, health systems, and physicians, including value-based administration, population health, and advisory services and technology. The Company serves more than 85,000 physicians and 135 hospitals, and is located in Chicago, Illinois.

TripleTree Perspective

The acquisition of Valence expands the Evolent’s Medicaid offering and creates significant opportunity for cross-sales to its existing customer base through added operational scale and distribution. The transaction will add roughly 11 long-term partners and more than one million lives to the Evolent platform in 2017. Additionally, the scale and cost savings will accelerate Evolent’s objective of breakeven EBITDA by 1-2 quarters, and addresses concern from investors regarding domestic competition from a growing market of population health solution vendors.

Public Markets

The stock market was generally higher in the third quarter as investors correctly anticipated the Federal Reserve would maintain low rates and push any rate increase further into the future. The S&P 500 increased 3.3% while the S&P Healthcare index, composed of major healthcare companies, increased at a slower pace of 0.5%.

DaVita Inc., a provider of kidney dialysis services, announced in August a share buyback program for up to $1.2 billion of its common stock. This program is in addition to its existing buyback program which it repurchased $249 million of common stock in the first half of 2016.