Infusion and valuations

Sunday, February 27, 2011

Here's a roundup of what's hot and what's not in the M&A market for HME right now:

What's hot?

Home infusion was a well-performing niche in the HME industry in 2010 and industry watchers expect that to continue in 2011. There's one little problem, they say.

"There's significant buyer interest, because they aren't included in competitive bidding and because they took their cuts years ago," said Bob Leonard, an analyst with The Braff Group, a Pittsburgh-based M&A firm. "But there aren't too many targets."

So a private equity firm may want to enter the home infusion market or big providers like Apria may want to expand their presence, but there aren't many providers to buy, because so few of them offer the service.

"The mixing and compounding--it requires a certain skill set," said Bruce Burns, president of Affinity Ventures, an Albuquerque, N.M.-based M&A firm. "It's not as much of a commodity business."

Other hot niches, industry watchers say: any mail-order supplies.

What's not?

Valuations for HME companies didn't go up in 2010, but at least they didn't go down, either, industry watchers say.

"They leveled to a point where they're reasonable," said Jonathan Sadock, partner and CEO of Paragon Ventures, a Philadelphia-based M&A firm. "The good news is: The values may be lower, but there's still value."

Industry watchers expect more of the same in 2011.

"I think it will stay stable in the 50% to 70% of revenues range," said Rick Glass, president of Steven Richards & Associates, a Tarpon Springs, Fla.-based M&A firm.