The number of private equity firms investing in gastroenterology practices and surgery centers doubled in 2019. As of the end of 2019, six PE firms were actively investing in the space with three new firms entering in the last three quarters of 2019.
As of the end of 2019, there were 25 private equity firms actively investing in ophthalmology practices and surgery centers. It is among the most active physician practice consolidations currently taking place in the United States.
Is gastroenterology the next darling of private equity? Large GI practice acquisitions exploded in 2019, tripling that of the prior three years. Expansion to new geographic areas doubled in each of the last three quarters of 2019. We see this activity accelerating in 2020 when a significant number of new private equity investors enter the market and physician sellers see high demand for their practices.
Private equity investment in ophthalmology practices has been one of the "hottest" sectors in M&A over the last several years. We believe the market will continue to be strong but our key indicators now signal a transition to Network Growth in 2020 – a more mature phase characterized by consistent add-on acquisitions. There are still open geographies with great opportunity, such as Texas and multiple areas on the West Coast. We project increased deal activity in these areas including large platform acquisitions.
Improved Patient Care, Revenue Growth, Profit Improvement
In order to gain a return on their investment, PE firms look to improve operations and grow their portfolio companies through organic and inorganic initiatives, ideally driving a much higher valuation and EBITDA multiple when the portfolio company is sold (usually in 5-7 years).
Private equity investment in orthopedic practices is in the early pioneering stage. Twelve private equity firms have participated in major orthopedic and spine practice investments … 6 as LEAD investors and 6 as participating investors. We examine the six lead investors to understand their investment strategy, current geographic footprint, and growth prospects. We also discuss the five issues we believe will drive the future growth of private equity investment in orthopedics.