Gastroenterology and Private Equity: Key Findings / 2020 Outlook
Our recently published white paper examined all core aspects of private equity's investment in gastroenterology practices and surgery centers from 2016 – 2019. Below are our key findings and 2020 outlook.
The end goal objectives of the current wave of specialty practice consolidations have been proven out by recent ophthalmology recapitalizations at high EBITDA multiple. This is attracting new investors and continued development by participating investors.
Key indicators and analysis suggests the U.S. gastroenterology consolidation wave is entering a significant acceleration phase.
Given the unique makeup of gastroenterology in terms of physician size, market coverage and acquisition opportunity, we believe a significant number of new PE investors will enter the gastroenterology market in 2020.
Analysis shows the gastroenterology consolidation has reached a tipping point that signals a significant surge in activity by firms already invested as well as those considering entry. We believe the rush is on to secure strong platform acquisitions and important add-on practices in key geographic areas.
Two key factors provide a view of current and future consolidation speed: 1) the acquisition of platform practices of 10 or more physicians and 2) the geographic footprint of those acquisitions. Gastroenterology platform acquisition exploded in 2019 when platform acquisitions tripled all platform activity in the prior three years. Importantly, those acquisitions occurred across a wide footprint throughout the United States.
In 2020, we believe there will be a significant increase in prospecting activity around the fourteen platform practices acquired in the 2019 calendar year as well as new geographies yet to be entered.
This article is an excerpt from our recently published White Paper: Gastroenterology 2020 Outlook - Private Equity Investment and Consolidation Strategies.