Gastroenterology Acquisition Activity Remains High in Q2 2021 – Major Opportunity for Selling Physicians
The second quarter of 2021 delivered eight gastroenterology practice acquisitions, coming down from the flurry of activity in Q1. Still, gastroenterology remains one of the most active and attractive PPM investment opportunities.
The FOCUS Carrier-Focused Telecom Technology Index (CFTTI) enjoyed yet another strong reporting period with a three-month gain of 13.1%. Not only was this gain impressive in absolute terms, but it handily outperformed both the 10.3% gain in the S&P 500 and the 4.2% gain in the NASDAQ over the same time period.The CFTTI still lags the broader indices for the full year period as its 18.6% gain in the last 12-months compares unfavorably to both the 38.1% gain in the S&P 500 and the 44.9% gain in the NASDAQ. Sector multiples ended the period at 2.6x revenue and 12.8x EBITDA. Both of these are higher than year-ago multiples of 2.4x revenue and 11.7x EBITDA.
The M&A market for companies in the Salesforce Partners program is reaching a critical inflection point. Competition is growing more intense, as the number of available firms shrinks, raising already-high valuations for those that remain independent. At the same time, proposed capital gains tax hikes make it imperative for potential sellers to consider doing deals as soon as possible.
The FOCUS Enterprise-Focused Telecom Technology Index (EFTTI) cooled off significantly this past three months but still managed to turn in a positive return of 2.2%. This lagged both the 12.6% gain in the S&P 500 and the 6.8% gain in the NASDAQ by fairly wide margins.The sector is still up a hefty 48.4% over the past year, which puts its performance roughly in the middle of the 43.6% gain in the S&P 500 and the 57.1% gain in the NASDAQ over the corresponding time frame. Sector multiples are also significantly higher than they were a year ago. The sector revenue multiple jumped from 4.0x to 6.3x, while the sector EBITDA multiple increased from 16.0x to 24.6x.
The FOCUS Communications Service Provider Index (CSPI) had a fourth straight reporting period with a positive return. However, this period’s gain of 1.3% was relatively modest and under-performed both the 5.8% gain in the S&P 500 and the 2.8% gain in the NASDAQ over the corresponding time frame. The CSPI is also up 27.6% for the full year. However, even with this substantial increase the sector still lags the S&P 500 (up 53.7%) and the NASDAQ (up 72.0%) by a wide margin. Sector multiples are significantly higher than they were at this time last year. The sector revenue multiple increased from 2.5x to 3.0x, and the sector EBITDA multiple jumped from 7.2x to 8.5x
The FOCUS Telecom Business Services Index (TBSI) had a fourth straight reporting period with a positive return, marking a full year of positive returns since the outbreak of the pandemic. This past three months was particularly strong as the sector’s gain of 20.1% handily outperformed both the 5.8% gain in the S&P 500 and the 2.8% gain in the NASDAQ. For the full year, the TBSI is up a very impressive 63.0%. While this gain was good enough to give it a comfortable lead over the 53.7% year-over-year increase in the S&P 500, it still lagged the 72.0% gain in the NASDAQ, Sub sector multiples are also meaningfully higher than they were at this time last year.The sub sector revenue multiple jumped from 0.5x to 0.7x, while the EBITDA multiple spiked from 6.6x to 9.3x.
Transaction Volume Continues to Increase Across Behavioral Health
The first quarter of 2021 delivered 38 reported behavioral health transactions, an increase over any quarter in 2020. We expect some of this activity reflects deals that were delayed due to COVID-19. However, we generally expect high deal flow throughout 2021, supported by increasing private equity interest, a favorable government, and a seller pool that is ready to transact.
Core Dermatology Buyers Remain Active to Start 2021. Window of Opportunity May Be Starting to Close for Smaller Practices.
The first quarter of 2021 delivered five reported dermatology practice acquisitions. This activity decline may signal that the window of opportunity for small practice deals may be starting to close. Indeed, dermatology consolidation is now in its tenth year. However, Schweiger, Epiphany, and Anne Arundel continued to acquire smaller add-on practices and grow their platforms.
Private Equity Interest in ENT & Allergy Practices Accelerates. Expect Increasing Opportunity for Large Practice Sellers.
The first quarter of 2021 delivered five reported ENT practice acquisitions marking the most active three-month M&A period we have seen in the specialty. Notably, Audax Private Equity formally named its portfolio company “Elevate ENT” and expanded into Texas with the major acquisition of Texas ENT Specialists. While the next quarter may not produce as many deals, activity should remain high throughout this year.