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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Physical therapy chains are facing tight labor constraints and cost pressures, but the business continues to attract investor dollars. 

Driving the news: Partners Group-backed Confluent Health acquired Motion Physical Therapy from Pharos Capital (more on that below).

State of play: The market has seen steady M&A activity, both at the platform and roll-up level. 

Waud Capital-backed Ivy Rehab, New Jersey's largest physical therapy provider, acquired Excel Physical Therapy this week for an undisclosed price.

Lindsay Goldberg sold PT Solutions to General Atlantic for about $1.2 billion last year, Axios reported then.

THL Partners launched an auction for ProPT last year via Jefferies, Axios reported, though sources tell Axios the process may be on hold. 

Yes, but: ATI Physical Therapy, which went public via SPAC merger at a valuation of about $4 billion in 2021, has yet to hit profitability and its share price has dropped steadily over the last 18 months. 

In November 2022, ATI received formal notice from the NYSE of noncompliance with continued listing standards.

Meanwhile, after acquiring Pivot Health Solutions for $550 million in 2021, BDT-backed Athletico reportedly launched $875 million term loan B to refinance its debt and pay for the acquisition.

Zoom out: Given labor pressures, capital is also flooding into digital health entrants that don’t rely on traditional clinics. For example:

Commons Clinic in December raised $11 million in seed funding as it looks to build the One Medical for specialty care.

In-personal physical therapy clinic operator Bardavon in June acquired virtual-first MSK startup PeerWell for 8 figures.

Virtual MSK provider Sword in November 2021 clinched $189 million in Series D capital steered by Sapphire Ventures at a valuation of $1.8 billion.

Hinge Health, another digital MSK company, in October 2021 soared to a $6.2 billion valuation after raising $600 million in Series E funding led by Coatue and Tiger Global.

1 big thing: Physical therapy M&A still warming up

Illustration of an exercise bike with a quarter for a wheel

Partners Group-backed physical therapy chain Confluent Health bought Motion PT Group from Pharos Capital for around $200 million to $250 million, sources tell Aaron and Claire.

Why it's the BFD: Motion is based in the Northeast U.S., where business is fragmented with underserved populations. In other words, dream territory for rollups.  

Details: The process included several sponsors with PT assets, such as Revelstoke Capital Partners and The Audax Group, the sources say.

McGuireWoods was the lender on the deal, one adds. 

Partners Group declined to comment on purchase price. 

Catch up quick: Axios reported in July that Motion was on the block via Livingstone and was marketed on $18 million of EBITDA. 

What they're saying: Staffing remains a major challenge for the industry. 

"When you look around the landscape, most PT providers have hundreds of job openings," says Ethan Matter, senior investment leader at Partners Group. 

"Confluent has less than 40 despite having 650-plus clinics," he continues. "Demand for PT has never been stronger, and musculoskeletal care is always in top five of employer and payer list, as far as costs hitting them."

Between the lines: Motion will operate as a hybrid care-delivery model, and Partners Group will use digital solutions for intake and scheduling.

"Digital-only is not the ultimate resolution," Matter says. "Cost pressures are what they are. We need to focus on talent acquisition and continue to hire great PTs that provide the best care, not to push down care to help bottom line."

One solution to the labor shortage is its Evidence in Motion professional education program, which partners with new graduates in health sciences programs.

What's next: Partners will pursue both organic and inorganic growth, because Matter says the Northeast market is "ripe with a lot of independent practices." 

"There is a lot of attention in the Northeast — one thing Motion has done a good job of was placing that interest in performance on the East Coast," one source says.

State of play: The list of potential Northeast-centric bolt-on targets could include:

Randolph, Massachusetts-based Bay State Physical Therapy, backed by Calera Capital in 2019.

Clark, New Jersey-based Twin Boro Physical Therapy, backed by The Beekman Group in 2019.

New York-based Spear Physical Therapy, which remains privately held.

Audax and Revelstoke did not return requests for comment.    

2. The BFD: Confluent Health buys Motion PT

Illustration of a person using an exercise band made from $100 bills.

Natural Cycles, maker of an FDA-cleared birth control app, raised $7m from Samsung Ventures with participation from insiders Heartcore Capital, Headline, Bonnier Ventures and EQT Ventures. https://axios.link/3Io1SPr

3. Deals o' the day

Signify Health named former Crossover Health chief product officer Joel Haugen SVP of value care solutions. https://www.signifyhealth.com/

Redesign Health named former Novartis managing director Eric Boutin venture chair. https://www.redesignhealth.com/

Vesey Street Capital Partners promoted Bryan Sekino to president and COO, promoted Takako Togami to CFO and promoted Alex Chouraqui to VP. https://www.vscpllc.com/

Portal Innovations named former Sartorius Stedim Biotech field account manager Parth Rao director of Chicago lab operations. https://www.portalinnovations.com/

Homethrive named former Uber exec Karan Chawla has chief product officer. https://www.homethrive.com/

Women in DSO named DentaQuest AVP Cheryl Polmatier to its advisory board.

4. It's Personnel

U.S. Begins Allowing Medicaid Money To Be Spent on Food — WSJ 

Tonal in Talks To Raise Funding That Could Slash Its Valuation, Considers CEO Change — Bloomberg 

5. Your daily dose

illustration of a digital thermometer that reads "daily dose" 

Aaron dropped 20 points in his basketball game, but it was in a losing effort. 

🙏Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Brad Bonhall. Please ask your friends and colleagues to sign up.

February 15, 2023

1 big thing: Physical therapy M&A still warming up