Illustration: Gabriella Turrisi/Axios
Surgery Partners, a Nasdaq-listed ambulatory surgery center operator, announced an $800 million primary offering yesterday, with its largest shareholder, Bain Capital, contributing $225 million.
Why it matters: The move delevers Surgery Partners’ balance sheet from 6x to around 4.2x — at a time when investors aren’t taking kindly to strategics with heavy debt loads — and better positions it for M&A in a buyer’s market, executive chairman Wayne DeVeydt tells Axios
- It's also the largest 100% primary raise in health care this year, per Dealogic.
Details: A new anchor investor came in as part of the raise, which DeVeydt characterized as a household name and which Bain Capital's Andrew Kaplan called a “major public markets investor.”
Of note: Bain, at year five of its investment in Surgery Partners, elected to double down instead of exit.
- Bain Capital's name held weight when Surgery Partners was on the roadshow circuit, particularly in a tightened financing market, DeVeydt says.
What’s next: Surgery Partners has been an active acquirer of ambulatory surgery centers (ASCs), with its annual deal pipeline worth north of $200 million, DeVeydt says.
- “We have offers out for half of that, with the other half under LOI and doing due diligence,” he adds.
- The company’s bread-and-butter is ASCs that offer procedures typically insulated from economic downturns, such as those in musculoskeletal health, ophthalmology and gastroenterology.
- Surgery Partners often takes a 51% to 60% stake in targets, which tend to be independently owned businesses, striking more of a partnership than a strict buyout.
- DeVeydt expects to acquire on an aggressive clip amid an uncertain macroeconomic environment. "It's exactly at these moments that smaller facilities are looking for a partner," he says.