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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

A sale process is underway for Tyree & D'Angelo Partners' veterinary platform Western Veterinary Partners, multiple sources tell Axios' Claire Rychlewski.

Why it matters: Despite tightened debt markets and some shelved sale processes, veterinary platforms have still been fetching high double-digit EBITDA multiples.  

Deal prices that start with B have been more difficult to come by, but not impossible. See VetCor's $1.1 billion-plus buy of People, Pets & Vets. 

Details: William Blair is advising Denver-based Western Vet, with first-round bids collected earlier this month, sources tell Axios.

Western Vet generates around $40 million in EBITDA, the sources say. 

The company has a geographic presence across 36 states, according to its website. 

Flashback: Tyree D'Angelo acquired Western Vet in June 2019 for an undisclosed amount.

Five months later, the sponsor sold another veterinary portfolio company, Heartland Vet, to Gryphon Investors, for around $350 million to $400 million.

Tyree & D'Angelo and William Blair did not respond to a request for comment. 

1 big thing: Western Vet scoop

Illustration of hundred dollar bills in the shape of a dog's head and two floppy ears.

Deal multiples for general practice vet groups have climbed steadily through the pandemic-fueled pet boon, though the sector is not immune to the labor crisis hitting all corners of health care. 

PP&V's trade was a success story and now we've got our eyes on a number of other processes. (Any updates on these? Write to us.)

Partners Group-backed Blue River Petcare, which Axios reported is gearing up for a sale.

North Castle Partners-backed Encore Vet Group, which Axios wrote kicked off a sale process earlier this year via Harris Williams.

Compass Group Equity Partners-backed CareVet, which hired Lincoln International for sale advisory early this year. But it's unclear if the business ever formally went to market.

Shore Capital Partners hired Goldman Sachs and Jefferies to explore a sale of SVP, Mergermarket reported earlier this summer.

2. State of play: Veterinary groups 

Lee Equity Partners acquired a majority stake in Bradford Health, a Birmingham, Alabama-based operator of treatment centers for substance use disorder. 

Why it's the BFD: While many health care deals aren't closing in an accelerated manner today, Bradford is another data point reflecting both the ability to transact in the lower middle market — where lining up financing isn't quite as challenging, Sarah writes. 

Zoom in: Axios wrote in April that a sale process was underway for Bradford, whose EBITDA sources pegged at some $20 million to $30 million at the time. 

The deal provides an exit for Centre Partners, which backed Bradford in mid-2016.

Harris William and Coker Capital advised Bradford, while Fifth Third and Comvest provided financing for the transaction. Terms were not disclosed. 

Bradford has a network of 40 substance abuse treatment and recovery facilities spanning five states.   

The intrigue: Bradford boasts that it is "an early pioneer in value-based behavioral healthcare reimbursement."

Of note: Lee's investment marks a return to the substance abuse treatment industry for the firm — whose past success and experience make it a logical suitor. 

Lee and FFL Partners jointly invested in Summit Behavioral Health in 2017, unloading the business in September 2021 to Patient Square Capital at a $1.3 billion valuation. 

The deal produced a 4x return for both firms, sources told Sarah at the time. 

💭 Sarah's thought bubble: Health care services investors are trying to figure out the "new normal" when it comes to valuations.   

The behavioral health bellwether folks are really waiting on? Linden Capital Partners' Pinnacle Treatment Centers, a much larger addiction treatment provider currently in play via Lincoln international. 

State of play: Bradford's trade reflects private equity's sustained appetite to tackle the underserved behavioral health market. Other notable PE bets behavioral health this year include: 

Vistria Group's quiet youth mental health bet, Sandstone Care.

Revelstoke Capital Partners' $700 million-plus deal for eating disorder treatment provider Monte Nido & Affiliates. 

3. The BFD: Lee buys another substance abuse treatment provider 

Illustration of a ladder coming out of an empty wine bottle.

Here's a look at our top stories from the week, including coverage from the Axios BFD event on Wednesday, which featured our Expert Voices panel.

As North America continues to suffer from a so-called epidemic of loneliness, a startup called Ritual is rolling out virtual tools to help people build and sustain meaningful relationships, CEO David Pruwer told Erin exclusively.

Why it matters: Healthy relationships are a core element of overall mental health, yet virtual offerings tailored to couples are lacking.

Read Monday’s Health Tech Deals newsletter.

Plus: Monday's Pro Rata, with a look at Gary Gensler's future

Elion, a digital health technology marketplace, is emerging from stealth with $3.3 million of seed funding led by NEA and Max Ventures, the parties told Sarah exclusively.

Why it matters: An explosion of digital health infrastructure software is making it increasingly difficult for startups — and incumbents — to determine which vendors are best suited for their needs.

Read Tuesday's Health Tech Deals newsletter.

Plus: Tuesday's Pro Rata, with a look at Paul Ryan's SPAC

Had Cost Plus Drugs founder Mark Cuban been pitched the pharmacy benefit manager model at "Shark Tank," it would have been a hard no, he told Axios reporter Hope King at the Axios BFD.

"I would have f--ked them up," Cuban said.

Why it matters: Cuban's transparent, direct-to-consumer pharmacy model shines a light on inefficiencies in the current drug supply chain and reimbursement system, which includes wholesalers, PBMs, pharmacies and insurers, Erin writes.

Read Thursday’s Health Tech Deals newsletter.

Plus: Thursday's Pro Rata, which looks at a lithium battery deal

4. 🗞 Catch up quick

RapidSOS, a New York-based provider of emergency data for first responders, raised $75m in funding led by NightDragon with participation from BAM Elevate, Insight Partners, Honeywell, M12 Microsoft’s Venture Fund, Axon, Citi via the Citi Impact Fund, Highland Capital Partners, Playground Global, Forte Ventures, C5 Capital and Avanta Ventures, bringing total capital raised to roughly $250m. https://axios.link/3DfwUFz

Midi Health, a San Francisco-based, virtual women's hormone care clinic, raised $14m in seed funding co-led by Felicis and SemperVirens with support from Emerson Collective, Icon Ventures, Operator Collective, Muse Capital, Steel Sky Ventures and Anne and Susan Wojcicki. https://www.joinmidi.com

Monteris Medical, a Minnetonka, Minn.-based developer of brain surgery technology, raised $73m including $35m in new Series D equity and a $38m debt facility led by new backer InnovaHealth Partners and supported by insider Birchview Capital. https://www.monteris.com/

5. Deals o' the day

Magenta Care Continuum named former Olive Ventures revenue associate Julie Pochodylo director of business development.

Google Brain named former Stanford senior manager of industry relations and digital health Kelsey Sobomehin head of strategic partnerships.

Grant Avenue Capital named former Tailwind Capital partner Brian Berkin managing director.

6. It's Personnel

Situational awareness: Join Erin on Wednesday, 11/2 @ 3pm ET for an exclusive, live conversation with ACME Capital’s Aike Ho to discuss health tech investing in 2023 and beyond. RSVP.

✅ Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your friends and colleagues to sign up.

October 28, 2022

1 big thing: Western Vet scoop