Private equity has appetite for home infusion

Wednesday, January 15, 2014

YARMOUTH, Maine – Demand for home infusion companies at both ends of the scale was strong in 2013, say analysts.

“There’s bigger deals and then there’s the bolt-on acquisitions,” said Reg Blackburn, managing director of specialty pharmacy and infusion services for The Braff Group. “There’s not a lot in the middle.”

The big news in 2013 was the sale of Coram to CVS Caremark in November for $2.1 billion. Other notable deals include BioScrip’s acquisitions of CarePoint Partners for $223 million and HomeChoice Partners for $70 million; and AxelaCare Health Solutions’ acquisition of SCP Specialty Infusion. Terms of that deal were not disclosed, but AxelaCare doubled its number of pharmacies.

As these deals illustrate, private equity backers are driving demand.

“There’s been some consolidation at the top with private equity firms buying some of the smaller companies from other private-equity backed companies,” said Bruce Burns, president of Affinity Ventures. “There’s high demand and it’s really a seller’s market.”

Analysts expect private equity demand for home infusion to remain robust, although it could be a challenge for firms seeking entry into the market, they say.

“Private equity firms are having trouble finding companies that are sizable platforms on which to enter,” said Blackburn. “They usually want something with about $30 million in revenue.”

For buyers looking to acquire smaller infusion companies—those with $3 million to $10 million in revenues—it’s all about strategy, say analysts.

“Where buyers need a presence in that market, or are looking to expand their geographic footprint—that’s where we are seeing activity,” said Blackburn.

With all the consolidation taking place, will the market eventually be comprised of only giant players? Not necessarily, say analysts.

“There are certainly more privately-held infusion companies than people realize,” said Jonathan Sadock, managing partner/CEO of Paragon Ventures. “There are also some HME companies that have gotten into infusion so it becomes a whole different animal. There are many different flavors out there.”