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Private equity firms get in the game

Private equity firms get in the game

For a few years now, there's been a lot of talk about private equity firms being interested in the HME industry. They're mainly attracted to the demographics—all those baby boomers retiring in record numbers. For the most part, though, they've been waiting, sitting on the sidelines.

Not anymore, says Dexter Braff, president of The Braff Group, which monitors M&A activity in the HME and other industries.

"There's been a remarkable development in the first quarter of this year," he said. "There were 10 private equity investments in HME."

Braff says you'd have to go back to 2005 to see that much private-equity driven M&A activity in the HME industry.

"Essentially, that was the end of the M&A boom for HME because of the Deficit Reduction Act," he said.

So what's made private equity firms get in the game?

"Virtually all of the transactions are outside of the traditional core DME/respiratory," Braff says. "So what we're seeing is an acceleration in interest in the secondary, non-core products like supplies, sleep devices, mobility and rehab. What my sense of it is, a lot of these products are less focused on geriatric patients, so you're dealing with a more diversified payer mix. Secondarily, in the HME space, these have been the areas that have been consolidated the least, so they represent the best available opportunity to create critical mass very quickly."

As a general rule, Braff says buyers look for industries "in flux." If that doesn't define the HME industry, I don't know what does.

"These buyers ask themselves, 'Can I get a quick position in a market where people are distracted?'" he said.

Again, if that doesn't define the HME industry...

This gives credence to another thing there's been a lot of talk about: Whether or not all is doom and gloom in the HME industry right now.

Jonathan Sadock, a partner and CEO of Paragon Ventures, told me recently that the only people who feel that way are those who are, and here's that cliche again, sitting on the sidelines.

So private equity firms are in the game. What do you say HME providers? What about you?

Liz Beaulieu


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