M&A market for home IV called red hot

Sunday, March 4, 2007

YARMOUTH, Maine - The M&A market for home infusion businesses heated up in 2006 and the continued forecast is "scorching."

"We probably have 20 active buyers for every single seller that's out there right now," said Jonathan Sadock, a managing partner with Paragon Ventures in Philadelphia. "We're seeing strong margins and a rapidly increasing market."

In 2006, there were 17 deals in the sector and 2007 looks just as strong, says Dexter Braff, president of Pittsburgh-based The Braff Group.

"There's a lot of money looking to chase further expansion opportunities, and the HME space is just not appealing right now," said Braff. "Home infusion is a homecare business with similar demographics that we find in other segments but as a market reimbursed primarily through private insurance, it doesn't have the risk."

Factors fueling the growth include an aging population with a host of chronic conditions, a number of new infusible drugs in the pipeline and technology advances making it possible to perform more therapies in the home. A reimbursement structure built on private insurance makes home infusion attractive to buyers, who also see it as more risk-averse than HME.

"Home infusion hasn't been subjected to reimbursement cuts for a number of years," said Rick Glass, president of Steven Richards & Associates, an M&A firm in Tarpon Springs, Fla. "I think we'll see continued activity for the next couple of years."

Private equity groups are targeting companies with revenues of $15 million to $25 million. Smaller regional players are most interested in companies with revenues in the $2 million to $5 million range.

"The top five players make up about 25% of the market, so there's still a lot of small guys out there," said Mike Patton, senior director of mergers and acquisitions for Boston-based Provident Healthcare Partners. "There's also (buyers) out there who are continuing to add on through small mom and pop acquisitions."