Healthcare Industry Review Q4 2014
Transcription
Healthcare Industry Review Q4 2014
Healthcare Industry Quarterly Review – Q4 2014 Contents: M&A Trends Public Market Valuation Metrics Bill Rogers, ICD.D Managing Director & CEO 416‐619‐9120 [email protected] Robert Bird, CPA, CA, CFA Managing Director 416‐619‐9117 [email protected] Hugh Notman Managing Director 604‐689‐2495 [email protected] Select Company Trading & Operating Metrics Featured Transactions Canadian Announcements Canadian Banking and Private Equity Trends March 2015 Introduction Q4 2014 Welcome to CCC Investment Banking’s Healthcare Industry Review covering the fourth quarter of 2014. M&A Activity Levels – There were 105 announced or completed North American Healthcare transactions in the fourth quarter of 2014 which is the industry’s second lowest quarterly total dating back to early 2012. This result is slightly above the 101 total deals announced in the previous quarter, but well below the 148 deals in Q4 2013. There were three Healthcare sectors that saw an increase in deal volume compared to the previous quarter with the Services sector rebounding the most with an increase of 75% followed by Supplies at 22% and Technology at 13%. The two sectors to experience moderate declines in volume include the Facilities sector which dropped by 27% to 11 deals (its fifth quarterly decline in a row and lowest quarterly total since 2012) followed by Equipment which fell by 24%. The Distribution sector remained unchanged with ten transactions for the third consecutive quarter. Overall Canadian M&A activity across all industries dipped to 267 change of control transactions in Q4 2014 which is a slight 1% decrease compared to Q3 2014 as well as a 5% decrease compared to Q4 2013. Buyer Composition – There were nine announced Healthcare Private Equity (“PE”) deals in Q4 2014 representing 9% of the total deal activity in the quarter. This result falls directly in between the quarterly average of eight for 2014 and ten for 2013 . There were also an additional six non PE financial transactions while the remaining 90 deals were all completed by strategic acquirers. Canadian Deals – There were five Canadian‐based Healthcare deals announced in Q4 2014 representing approximately 5% of the North American Healthcare deal activity. This is surprisingly low compared to the previous two year quarterly average which typically represents between 7% and 10% of the North American Healthcare transaction volume. Public Market Valuations and Profit Margins – The Healthcare market experienced strong gains in overall market value. The CCC Healthcare Index increased by approximately 20.2% during Q4 2014 which follows a minimal 2.4% gain in Q3 2014. This is a substantial increase when compared to the NASDAQ which rose by 9.1% as well as the S&P/TSX which fell for the second consecutive quarter at 2.5%. Enterprise Value/EBITDA1 multiples in every subsector experienced an increase compared to Q3 2014 with the Supplies sector increasing the most (+2.2x) followed by Equipment (+2.0x), Technology (+1.8x), Facilities (+1.1%), Distribution (+0.9%) and Services (+0.9x). Overall profitability margins, as defined by sector median EBITDA1/Revenue, experienced an increase in only the Equipment sector (+0.2%) while the Facilities (‐1.4%), Technology (‐1.0%) and Supplies sectors (‐0.8%) all experienced declines. Both the Distribution and Facilities sectors remained unchanged. Thank you, William (Bill) F. Rogers Managing Director and CEO CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. Robert Bird, CPA, CA, CFA Managing Director 1) 2 EBITDA: Earnings before interest, taxes, depreciation and amortization M&A Trends Q4 2014 Healthcare M&A Highlights • 105 majority stake transactions were announced in Q4 2014, compared to 101 in Q3 2014, 121 in Q2 2014 and 148 in Q4 2013. This is the second lowest quarterly deal total dating back to 2012 and a decrease of 29% compared to Q4 2013. • Three of the six Healthcare sectors saw an increase in deal volume compared to the previous quarter. The largest increase involved the Services sector with announced deals increasing by 75% to 14 transactions followed by Supplies and Technology with 22% and 13% increases respectively. The two sectors to witness a decrease in deal volume involved Facilities which fell by 27% to 11 transactions (it’s lowest quarterly total dating back to 2010) and Equipment which fell 24%. The Distribution sector once again remained unchanged. • Average transaction value for all deals with disclosed values under US$500M equaled US$86M which is an increase of 39% compared to Q3 2014. This result is the highest average reported over the past three years and is well above the 2014 quarterly average of US$69M. Of these deals, there were six (or 29% of all reported deals) between US$150M and US$500M. Q4 2014 North American Healthcare Deal Volume by Sector Technology 41% Distribution 10% Annual Annual Annual Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 2012 2013 2014 Technology Distribution 31 37 128 34 43 38 43 158 10 6 12 11 39 13 10 10 10 43 29 27 26 28 110 35 20 21 16 92 Facilities 123 20 31 70 40 161 31 28 15 11 85 Supplies 30 6 6 9 10 31 9 8 9 11 37 Total Facilities 11% 30 53 Services Services 13% 30 105 Equipment Equipment 15% 105 148 63 15 14 13 22 64 16 12 8 14 50 522 110 114 161 148 533 138 121 101 105 465 Supplies 10% Historical Quarterly North American Healthcare Deal Volume by Size(1) and Geography $90 180 160 140 120 100 80 60 40 20 0 $80 $70 $60 $50 $40 $30 $20 $79 $79 $76 $63 $86 $62 $48 $49 $10 $0 10 8 13 9 14 151 102 12 136 100 125 112 7 5 94 100 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 (1) Average transaction value for all deals with disclosed values under US$500M Canada US Sector Definitions Equipment: Medical equipment, home Healthcare equipment, testing, analyzing and diagnostic equipment, therapeutic devices and dental equipment Distribution: Healthcare equipment and product distribution Facilities: Assisted living facilities CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. 3 Technology: Technology products and services targeting the Healthcare industry Services: Medical laboratories and rehabilitation centres Supplies: Medical consumables, instruments and optical supplies Public Market Valuation Metrics Q4 2014 The charts below show North American Q4 2014 EV/EBITDA and EBITDA/Revenue by sector. Median Q4 2014 LTM EV/EBITDA by Sector #(1) Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Services Services Facilities Distribution Equipment Supplies Technology 9.8x Facilities 11.5x Distribution 12.5x 14.0x Equipment 14.4x Supplies 11 14 9 56 32 23 8.1x 11.7x 10.5x 12.1x 12.8x 14.5x 0.0x 2.0x 4.0x 6.0x 8.0x 10.0x 12.0x 14.0x 16.0x 18.0x 8.4x 15.6x 12.6x 13.7x 13.9x 16.5x 8.7x 10.7x 11.1x 13.0x 14.0x 18.1x 8.9x 10.4x 11.6x 12.0x 12.2x 17.2x 9.8x 11.5x 12.5x 14.0x 14.4x 19.0x (1) # of publicly traded companies identified 19.0x Technology 7.7x 13.0x 11.7x 13.5x 15.0x 15.5x 20.0x Median Q4 2014 LTM EBITDA/Revenue #(1) Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Distribution 4.5% Facilities 9.6% Services 13.5% Technology 14.1% Equipment 19.1% Supplies 19.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Distribution Facilities Services Technology Equipment Supplies 9 14 11 23 56 32 3.4% 13.8% 14.1% 14.8% 18.0% 19.4% 3.4% 13.8% 14.1% 13.8% 17.4% 20.0% 3.4% 10.9% 14.4% 14.3% 17.0% 19.5% 4.3% 10.1% 14.9% 13.4% 17.7% 18.6% 4.5% 9.6% 14.9% 15.1% 18.9% 20.1% (1) # of publicly traded companies identified 20.0% Below is a chart comparing the CCC Healthcare Index to the performance of the NASDAQ Composite Index and the S&P/TSX Composite Index. This chart depicts the percentage change in the index value from January 1, 2011 to December 31, 2014. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% ‐10% ‐20% CCC Healthcare Index S&P/TSX Composite Index ‐ Index Value * The index is comprised of 54 Healthcare stocks selected by the CCC Healthcare team CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. 4 4.5% 9.6% 13.5% 14.1% 19.1% 19.3% NASDAQ Composite Index (^COMP) ‐ Index Value Select Company Trading and Operating Metrics Ticker Company Stock Price 31-Dec-14 (US$) Technology NasdaqGS: ATHN TSX:CCT NasdaqGS:CERN NasdaqGS:MDAS NasdaqGS:QSII Total Enterprise Value (TEV) 52 Week High Low Total Debt LTM Revenue Q4 2014 LTM EBITDA EBITDA Margin Total Debt to LTM EBITDA TEV / LTM TEV / LTM Revenue(1) EBITDA(1) (US$ millions) athenahealth, Inc. Catamaran Corporation Cerner Corporation MedAssets, Inc. Quality Systems Inc. $145.70 $206.70 $51.91 $52.43 $64.66 $66.45 $19.76 $26.09 $15.59 $21.07 $97.30 $34.99 $48.39 $18.15 $13.01 $5,658 $11,291 $20,895 $2,085 $816 $213 $1,437 $147 $909 $0 $711 $20,371 $3,181 $692 $477 $59 $806 $841 $207 $43 8% 4% 26% 30% 9% 3.58x 1.78x 0.17x 4.38x ‐ Avg. 7.96x 0.57x 6.57x 3.01x 1.71x 3.96x 95.31x 14.51x 24.83x 10.05x 18.97x 32.74x Becton, Dickinson and Company Boston Scientific Corporation CONMED Corporation Hologic Inc. ResMed Inc. $139.16 $142.56 $105.21 $13.25 $14.08 $11.10 $44.96 $50.47 $35.55 $26.74 $27.35 $19.91 $56.06 $57.57 $41.52 $28,134 $21,575 $1,421 $11,017 $7,311 $3,971 $4,252 $241 $3,955 $450 $8,432 $7,331 $734 $2,549 $1,616 $2,164 $1,638 $128 $914 $488 26% 22% 17% 36% 30% 1.84x 2.60x 1.88x 4.33x 0.92x Avg. 3.34x 2.94x 1.93x 4.32x 4.52x 3.41x 13.00x 13.17x 11.09x 12.05x 14.99x 12.86x ATRION Corp. DENTSPLY International Inc. Haemonetics Corporation Utah Medical Products Inc. West Pharmaceutical Services, Inc. $340.01 $355.91 $254.12 $53.27 $56.25 $42.99 $37.42 $43.60 $29.86 $60.05 $61.00 $44.52 $53.24 $55.29 $39.11 $617 $8,821 $2,220 $213 $3,884 $0 $1,380 $429 $5 $347 $140 $2,957 $925 $41 $1,414 $49 $584 $123 $20 $267 35% 20% 13% 47% 19% ‐ 2.36x 3.47x 0.25x 1.30x Avg. 4.41x 2.98x 2.40x 5.15x 2.75x 3.54x 12.48x 15.12x 17.98x 10.85x 14.57x 14.20x AmerisourceBergen Corporation Cardinal Health, Inc. Owens & Minor Inc. McKesson Corporation PharMerica Corporation $90.16 $92.84 $62.55 $80.73 $83.40 $63.06 $35.11 $37.90 $31.55 $207.58 $214.37 $159.45 $20.71 $30.48 $19.42 $19,904 $1,996 $123,981 $28,257 $3,976 $93,928 $2,371 $766 $9,267 $56,497 $10,572 $161,201 $1,032 $361 $1,822 $1,407 $2,435 $237 $3,557 $115 1% 3% 3% 2% 6% 1.42x 1.63x 3.23x 2.97x 3.13x Avg. 0.16x 0.30x 0.26x 0.35x 0.57x 0.33x 14.15x 11.60x 10.01x 15.88x 8.95x 12.12x Equipment NYSE:BDX NYSE:BSX Nasdaq:CNMD NasdaqGS:HOLX NYSE:RMD Supplies * NasdaqGS:ATRI Nasdaq:XRAY NYSE:HAE NasdaqGS:UTMD NYSE:WST Distribution NYSE:ABC NYSE:CAH NYSE:OMI NYSE:MCK NYSE:PMC Facilities TSX:ACC NYSE:BKD NYSE:CSU NYSE:KND TSX:LW Amica Mature Lifestyles Inc. Brookdale Senior Living Inc. Capital Senior Living Corp. Kindred Healthcare Inc. Leisureworld Senior Care Corp. $7.19 $37.03 $26.89 $26.81 $12.43 $5.80 $26.11 $20.33 $17.59 $9.61 $628 $12,903 $1,363 $2,628 $956 $442 $6,415 $666 $1,497 $558 $124 $2,931 $367 $5,081 $393 $33 $522 $57 $291 $55 27% 18% 15% 6% 14% 13.23x 12.30x 11.70x 5.15x 10.15x Avg. 5.16x 4.40x 3.71x 0.52x 2.52x 3.26x 19.07x 24.73x 23.95x 9.05x 18.01x 18.96x $32.13 $34.00 $19.05 $19.90 $107.90 $109.84 $31.18 $31.95 $67.06 $68.51 $24.13 $7.35 $87.25 $19.69 $50.46 $929 $1,759 $11,575 $629 $13,443 $55 $1,157 $3,015 $65 $3,762 $832 $1,970 $5,936 $690 $7,435 $109 $154 $1,138 $56 $1,297 13% 8% 19% 8% 17% 0.51x 7.50x 2.65x 1.17x 2.90x Avg. 1.12x 0.89x 1.95x 0.91x 1.81x 1.34x 8.55x 11.40x 10.17x 11.28x 10.37x 10.35x $6.07 $36.67 $24.91 $18.18 $12.08 Services NasdaqGS:BRLI NasdaqGS:GTIV NYSE:LH NasdaqGS:LHCG NYSE:DGX Bio‐Reference Laboratories Inc. Gentiva Health Services Inc. Laboratory Corp. of America Holdings LHC Group, Inc. Quest Diagnostics Inc. Notes: As at December 31, 2014 (1) All trading multiples based upon trading currency Source: Capital IQ * Quarterly Company Featured: West Pharmaceutical Services, Inc. Sector: Supplies Location: Exton, Pennsylvania, United States Website: www.westpharma.com Description: West Pharmaceutical Services, Inc. is the world's premier manufacturer of components and systems for injectable drug delivery, including stoppers and seals for vials, and closures and disposable components used in syringe, IV and blood collection systems. The Company also provides products with application to the personal care, food and beverage markets. West's customers include the world's leading pharmaceutical, biotechnology, generic drug and medical device producers. Headquartered in Exton, Pennsylvania, West Pharmaceutical supports its partners and customers from 50 locations throughout North America, South America, Europe, Mexico, Japan, Asia and Australia. CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. 5 Featured Transactions Q4 2014 Technology Technology (cont’d) – U.S.‐based PE firm GI Partners, LLC agreed to acquire Montreal‐ based Logibec Inc. from OMERS Private Equity and others on December 19, 2014. Logibec offers Clinibase, a clinical solution to capture, analyze and manage patient information. – New York‐based manufacturer of medical diagnostic equipment Welch Allyn, Inc. acquired Nebraska‐based HealthInterlink, LLC, a medical software company, on December 8, 2014. – Maryland‐based imaging and information management solutions provider DataBank IMX, LLC acquired Pennsylvania‐ based Griffith, Inc., trading as Alpha Systems, on November 25, 2014. Alpha Systems provides data and document management solutions for hospitals and large Healthcare systems in the U.S. – Texas‐based provider of Healthcare vendor credentialing services IntelliCentrics, Inc., doing business as Reptrax, acquired Toronto‐ based Vendorlink.ca Ltd. from Liuna Capital Corp. and others on October 7, 2014. Vendorlink.ca provides a web‐based vendor management solution for hospitals in Canada. – Oakville‐based provider of pet medical insurance Pethealth Inc. acquired U.S.‐based HumaneSolution.com on December 26, 2014. HumaneSolution.com provides a hosted line‐of‐business service for spay/neuter clinics in the U.S. – California‐based MedeAnalytics, Inc., a provider of cloud‐based Healthcare analytics solutions, acquired Tennessee‐based ONFocus Healthcare Inc. on November 18, 2014. ONFocus offers enterprise performance management (epm) software and support services for Healthcare companies. – Toronto‐based investment firm Syncordia Technologies and Healthcare Solutions, Inc. acquired California‐based Health Services Integration, Inc. on November 10, 2014. Health Services Integration operates as an EMS claims management company that specializes in air and ambulance billing services. – New York‐based digital health and wellness solutions provider Everyday Health, Inc. (NYSE:EVDY) acquired North Carolina‐ based DoctorDirectory.com, Inc. for US$65M in cash on November 12, 2014. DoctorDirectory.com operates an online directory for finding a Healthcare professional by specialty. – Ontario‐based Maple Power Capital Corporation agreed to acquire Michigan‐based Intrinsic Medical Imaging LLC from Envy Capital on October 14, 2014. Intrinsic Medical provides software solutions for patient screening and surgical planning. – Minnesota‐based ABILITY Network Inc. acquired New Jersey‐ based electronic Healthcare solutions provider MD On‐Line, Inc. from Abingworth LLP and others on November 12, 2014. – Atlanta‐based health information solutions company iMedX, Inc. acquired Texas‐based Superior Global Solutions, Inc. and Anaheim‐based Medwrite Inc. on November 7, 2014. Superior Global provides revenue cycle and health information management solutions while Medwrite operates a portal that facilitates workflow automation of medical transcriptions. – Illinois‐based Abbott Laboratories (NYSE:ABT) acquired Nebraska‐ based UNeLAB LLC from Prairie Ventures, LLC on December 24, 2014. UNeLAB provides laboratory automation technology. – Michigan‐based information technology (“IT”) provider HTC Global Services, Inc. acquired Michigan‐based CareTech Solutions, Inc. from Compuware Corporation, Oakwood Healthcare, LLC and Detroit Medical Center, Inc. on December 18, 2014. CareTech provides IT and Web products and services for Healthcare, business and higher education markets in the U.S. – Philadelphia‐based eResearchTechnology, Inc. acquired Massachusetts‐based eClinical Insights, Inc., a provider of a cloud‐based clinical software, on November 6, 2014. – Europe’s largest media group, Bertelsmann SE & Co. KGaA acquired Florida‐based Relias Learning, LLC from Vista Equity Partners and LLR Partners Inc. for US$540M in November 2014. Relias provides online training solutions for senior care, health and human services along with various other industries. – Nashville‐based revenue and payment cycle management provider Emdeon Inc. acquired Texas‐based AdminiSource Communications, Inc. from Alegeus Technologies, LLC for US$35M in cash on December 10, 2014. AdminiSource develops Healthcare payment distribution solutions for insurance carriers and Healthcare organizations. – U.S. PE firm New Mountain Capital, LLC agreed to acquire Georgia‐based HealthPort Incorporated on October 31, 2014. HealthPort provides release of information (ROI) services and audit management and tracking technology for various sections of the Healthcare industry. – Nebraska‐based National Research Corporation (NasdaqGS:NRCI.B) acquired Atlanta‐based Digital Assent LLC from various investors on December 9, 2014. Digital Assent develops a tablet‐based technology that enables patients to make educated and informed decisions at the point of care. – Virginia‐based Booz Allen Hamilton Holding Corporation (NYSE:BAH) acquired Boston‐based health data and analytics solutions company Epidemico, Inc. on October 29, 2014. – Nashville‐based revenue and payment cycle management provider Emdeon Inc. acquired Tennessee‐based Change Healthcare Corporation from various investors for approximately US$190M on December 8, 2014. Change Healthcare provides Healthcare cost transparency and consumer engagement solutions for health plans in the U.S. CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. – U.S. PE firm North Bridge Growth Equity acquired a majority stake in Atlanta‐based Ingenious Med, Inc. from Council Capital, BIP Opportunities Fund, LP and others on October 22, 2014. Ingenious Med provides the leading cloud‐based, patient encounter platform, IM1, for the Healthcare industry. 6 Featured Transactions Q4 2014 Technology (cont’d) Equipment – New York‐based provider of cloud‐based clinical development solutions Medidata Solutions, Inc. (NasdaqGS:MDSO) acquired California‐based Patient Profiles, LLC on October 14, 2014. Patient Profiles develops software for patient profile design and automated clinical data analytics in clinical trials. – Massachusetts‐based medical device developer ZOLL Medical Corporation, a subsidiary of Asahi Kasei Corporation (TSE:3407), agreed to acquire Minnesota‐based intrathoracic pressure regulation product manufacturer Advanced Circulatory Systems, Inc. on December 22, 2014. In two related transactions, ZOLL acquired San Diego‐based temperature modulation therapy product developer Post‐Hypothermia Corporation from Philips Electronics North American Corporation on November 17, 2014. ZOLL also acquired New Jersey‐based respiratory care product manufacturer Impact Instrumentation Inc. on October 28, 2014. – California‐based Box, Inc., an enterprise software platform for secure content collaboration, acquired San Francisco‐based Clariso, Inc. on October 9, 2014. Clariso provides data sharing and collaboration tools for the Healthcare industry. – Florida‐based NexTech Systems, Inc., a leading provider of specialty‐focused Healthcare technology solutions for physician practices, acquired Florida‐based MDIntelleSys, LLC on October 9, 2014. MDIntelleSys provides cloud based electronic health records for eye care specialists. – Netherlands‐based Kononklijke Philips N.V. (ENXYAM:PHIA) agreed to acquire San Diego‐based Volcano Corporation (NasdaqGS:VOLC) for approximately US$1.2B on December 16, 2014. Volcano is a leader in intravascular imaging for coronary and peripheral therapeutic devices. The deal represents a Total Enterprise Value (“TEV”) to Last Twelve Months (“LTM”) EBITDA of 75.7x and a TEV to LTM Revenue of 3.0x. Supplies – Switzerland‐based Roche Holding AG (SWX:ROG), a pharmaceutical and diagnostics provider, acquired San Jose‐ based Ariosa Diagnostics, Inc. from various investors on December 19, 2014. Ariosa offers Harmony prenatal test, a non‐ invasive blood test for pregnant women. – New York‐based Medical Depot, Inc., doing business as Drive Medical Design, acquired Ohio‐based Primus Medical, LLC on December 15, 2014. Primus manufactures fall prevention and wound care treatment products for the long term care industry. – Pennsylvania‐based specialty pharmaceuticals company BTG International Inc. agreed to acquire California‐based PneumRx, Inc. from various investors for approximately US$480M in cash on December 3, 2014. PneumRx develops products to treat emphysema using minimally invasive techniques. – Luxembourg‐based Eurofins Scientific SA (ENXTPA:ERF), an analytical testing service provider, agreed to acquire Boston Heart Diagnostics Corporation (BHDC) from various investors for US$200M on December 8, 2014. BHDC develops lipid tests and methodologies for cardiovascular risk assessment and disease management. – Illinois‐based Allegheny Health Network and Maryland‐based Johns Hopkins Home Care Group Inc. acquired an unknown majority stake in Pennsylvania‐based home medical equipment supplier Klingensmith, Inc. on December 2, 2014. – German‐based Leica Microsystems GmbH, a global leader in anatomic pathology workflow solutions and automation, acquired Cincinnati‐based Devicor Medical Products, Inc. from GTCR, LLC on December 4, 2014. Devicor develops breast biopsy instruments and consumables and had revenues of approximately US$170M in 2013. – New Jersey‐based Integra LifeSciences Holdings Corporation (NasdaqGS:IART), a leader in medical technology, acquired the Foot And Ankle Product Portfolio of Koby Ventures Ltd. in December 2014. The acquired portfolio includes the DigiFuse, MemoFix, Ti6®, BioMotion® and TruArch®. – Illinois‐based Healthcare product manufacturer Abbott Laboratories (NYSE:ABT) acquired San Diego‐based Topera, Inc., a catheter ablation company, from Alafi Capital Company LLC, New Enterprise Associates and others for approximately US$250 in cash on October 29, 2014. – Georgia‐based surgical products producer Stradis Healthcare, LLC agreed to acquire Illinois based Medikmark, Inc., a disposable medical kit packing company, on November 7, 2014. – Wisconsin‐based TIDI Products, LLC, a manufacturer of single‐use infection prevention products, acquired Michigan‐based RAWCAR Group, LLC, doing business as Contour Fabricators, Inc., on November 6, 2014. RAWCAR supplies disposables and system components for OEM customers in the medical imaging industry. – Amsterdam‐based medical device company Tornier N.V. (NasdaqGS:TRNX) and Memphis‐based specialty orthopedic company Wright Medical Group, Inc. (NasdaqGS:WMGI) have entered into a definitive merger agreement under which the two will combine in an all stock transaction with a combined equity value of approximately US$3.3B on October 27, 2014. – Missouri‐based life science and high technology company Sigma‐ Aldrich Corporation (NasdaqGS:SIAL) acquired California‐based Cell Marque Corporation for US$170M on November 4, 2014. Cell Marque is an industry‐leading provider of in vitro diagnostic (IVD) antibody reagents and kits. CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. – Connecticut‐based CooperSurgical, a subsidiary of Cooper Medical, Inc., acquired California‐based hysteroscopy instrument developer Endosee Corporation for approximately US$44M on October 8, 2014. 7 Featured Transactions Q4 2014 Equipment (cont’d) Services (cont’d) – New Jersey‐based medical technology company Becton, Dickinson and Company (NSE:BDX) agreed to acquire CareFusion Corporation (NYSE:CFN) from The Vanguard Group, Inc. and others for US$12.2B in cash and stock on October 5, 2014. CareFusion delivers products and services that help hospitals improve the safety and quality of care. The deal represents a TEV to LTM EBITDA of 13.6x and a TEV to LTM Revenue of 3.1x. – Illinois‐based pharmacy benefit management services provider Catamaran Corporation (TSX:CCT) acquired Florida‐based Salveo Specialty Pharmacy, Inc. from various investors for US$260M in cash on January 2, 2015. Salveo provides medications and clinical services to patients with chronic conditions. The deal represents a TEV to LTM EBITDA of 13.0x. – U.S. PE firms Elm Creek Partners, Bowside Capital and 747 Capital LLC acquired Houston‐based home health respiratory medical equipment services provider TCG Interests, Ltd., doing business as The Care Group of Texas, Inc., on December 2, 2014. Distribution – Toronto‐based The Canadian Bioceutical Corporation(TSXV:BCC), a developer of nutraceutical products for the treatment of common ailments, acquired Canadian‐based CGX Life Sciences, Inc. for CAD$0.45M in stock on November 18, 2014. CGX sells CinG‐X supplements used to reduce blood sugar and support cognitive functions in North America. – San Diego‐based Healthcare workforce solutions provider AMN Healthcare Services, Inc. (NYSE:AHS) acquired Nebraska‐based Avantas, LLC from Alegent Creighton Health for US$25M on December 22, 2014. Avantas provides labor management solutions and services to the Healthcare industry in Nebraska. – Quebec‐based Valeant Pharmaceuticals International, Inc. (TSX:VRC) acquired U.S.‐based NicOx Inc. from international ophthalmic company NicOx SA (ENXTPA:COX) for US$20M in cash on November 17, 2014. The deal involves most of NicOx’s commercial infrastructure in the U.S. associated with diagnostics. – New Jersey‐based molecular diagnostics company Interpace Diagnostics, LLC acquired Pittsburgh‐based RedPath Integrated Pathology, Inc. for US$34.8M on October 31, 2014. RedPath provides molecular diagnostic and clinical testing services to diagnose various types of cancer. – Toronto‐based Novadaq Technologies Inc. (TSX:NDQ), a developer of real‐time imaging systems for use in the operating room, has agreed to acquire all marketing and distribution rights of SPY Elite System from LifeCell Corporation on October 30, 2014. SPY Elite imaging provides clinically relevant information that empowers surgeons to make better‐informed critical decisions in the operating room. – Alaska‐based Chenega Corporation, a provider of government and commercial contract services, acquired San Antonio‐based AQTS Home Health Care on October 27, 2014. AQTS provides nursing, physical, occupational, speech therapy and home health aide to patients in their homes. – Louisville‐based Kindred Healthcare, Inc. (NYSE:KND) agreed to acquire Atlanta‐based Gentiva Health Services Inc. (NasdaqGS:GTV) for approximately US$720M in cash and stock on October 9, 2014. Gentiva provides home health, hospice and community care services in the U.S. The deal represents a TEV to LTM EBITDA of 11.7x and a TEV to LTM Revenue of 0.9x. – Minnesota‐based dental and rehabilitation supplies distributor Patterson Companies, Inc. (NasdaqGS:PDCO) agreed to acquire Wisconsin‐based Holt Dental Supply, Inc. on December 15, 2014. – U.S.‐based PE firm Ridgemont Equity Partners acquired a majority stake in Wisconsin‐based Allied 100, LLC from Thompson Street Capital Partners on December 3, 2014. Allied 100 engages in the supply of automated external defibrillators (AEDs). Assisted Living Facilities and Services – U.S.‐based investment firms Formation Capital, L.L.C. and Safanad Inc. agreed to acquire Milwaukee‐based Extendicare Holdings, Inc. for US$870M on November 7, 2014. Extendicare, through its subsidiaries, owns and operates Healthcare centers providing post‐acute and long‐term care. The deal represents a TEV to LTM EBITDA of 10.4x and a TEV to LTM Revenue of 0.8x. – Virginia‐based developer and distributor of over the counter pharmaceuticals ScripsAmerica, Inc. (OTCPK:SCRC) agreed to acquire a 90% stake in Miami‐based PIMD International LLC on December 1, 2014. PIMD distributes pharmaceuticals and medical devices for Healthcare clinics in the U.S. – U.S.‐based National Health Investors Inc. (NYSE:NHI) and Bickford Senior Living, LLC acquired a 101 unit assisted living and memory care community in Ohio comprising 101 units for US$18.1M on November 3, 2014. – New York‐based Curbell Plastics, Inc. acquired Illinois‐based O&P Enterprises, Inc. on November 4, 2014. O&P supplies plastics and foams to create orthotic and prosthetic solutions for patients. Services – U.S.‐based Aviv REIT, Inc. acquired two skilled nursing facilities in Dallas for US$28.5M on October 17, 2014. – Mississauga‐based Bayshore HealthCare Ltd., one of Canada’s leading providers of home and community Healthcare services, acquired Mississauga‐based pt Health Senior Wellness, a provider of physiotherapy and rehabilitation services, on October 14, 2014. CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. – California‐based Sabra Health Care REIT, Inc. (NasdaqGS:SBRA) acquired three assisted living facilities in Florida for US$27.6M on October 1, 2014. 8 North American Announcements & Trends Q4 2014 Estimated Number of Patients Receiving Canadians Continue to Leave Canada For Medical Care Treatment Outside of Canada (by province) The number of Canadian patients who travelled abroad in 2014 to receive non‐ emergency medical treatment increased 26% from 2013, according to a study Province 2014 2013 % Change conducted by Canadian independent research organization the Fraser Institute. Ontario 26,252 19,118 37% • In 2014, 52,513 Canadians travelled beyond Canada to seek medical treatment, British Columbia 9,799 8,146 20% compared with 41,838 in 2013. Quebec 6,284 4,904 28% • The percentage of Canadian patients who travelled abroad to receive non‐ Alberta 5,988 5,527 8% emergency medical care was 1.1%, an increase compared to 0.9% in 2013. Saskatchewan 1,050 714 47% • Physicians in British Columbia reported the highest proportion of patients Manitoba 1,048 1,636 ‐36% receiving treatment abroad, while Ontario had the largest number of patients Nova Scotia 975 927 5% seeking medical treatment elsewhere. New Brunswick 742 372 99% • The study showed that physicians specializing in procedures such as Newfoundland and Labrador 327 486 ‐33% colonoscopies, gastroscopies and angiographies reported the highest number of Prince Edward Island 48 8 500% patients leaving Canada for treatment. As for highest proportion of patients Total 52,513 41,838 26% travelling abroad, Neurosurgeons reported the highest proportion (2.6%), while plastic surgery reported the lowest (0.3%), indicating a gap in the field of neurosurgery treatment throughout Canada. • The study also speculates as to why Canadian patients left the country to pursue treatment elsewhere. The reasons include a lack of available resources and equipment in their home jurisdiction; the desire for more advanced health care facilities and technology and long wait‐times within the Canadian Healthcare system. • Results were based on a physicians’ survey, which means patients who left the country without consulting a specialist are likely not included in the estimates. Source: Fraser Institute (March 2015) Canadian Healthcare Ranks Poorly for Aging Population Recent results from The Commonwealth Fund (CMWF) 2014 International Health Policy Survey of Older Adults (55+), Canada ranks near the bottom when compared to other countries in regards to demand for medical attention when dealing with seniors. Canada Norway 53% United States Sweden United Kingdom The 53% shows no improvement since 2007 Key findings from the survey include: • 53% of Canadians aged 55 and up waited at least two days to see a doctor or nurse the last time they were sick or needed medical attention, highest among 11 countries. Next worse was Norway at 43%. The best was France at 17%. No improvement for Canada since 2007. • 30% of older Canadians waited at least six days to see a doctor or gave up waiting. • 25% of older Canadians waited for at least two months to see a specialist. Norway was just below at 24%. United States and Switzerland had best ranking at 3% each. • 51% of older Canadians couldn’t get medical care in evenings or on weekends, had to go to emergency room instead. Highest among 11 countries, second worst was United States at 40%. Best was Netherlands at 8%. • 37% of older Canadians went to an emergency department for a condition that could have been treated by their regular doctor. Second worst among 11 countries. U.S. was last at 40%. Best was Netherlands at 19%. CMWF AVERAGE 32% Australia Switzerland 30% Netherlands of Older Canadians waited at least 6 days or gave up New Zealand Germany France 25% Canada Norway New Zealand 25% of Older Canadians waited for at least 2 months to see a specialist; these waits have not improved over time Sweden Germany Australia CMWF Average United Kingdom France Netherlands Switzerland United States Source: Canadian Institute for Health Information The Commonwealth Fund 2014 International Health Policy Survey CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. 53% of Older Canadians waited for at least 2 days to see a doctor or nurse 9 15% Canadian Banking and Private Equity Trends Q4 2014 We are including some general Canadian PE and banking trends. Although some of the trends may not be specific to Healthcare, they are a barometer of M&A and financing activity in the general Canadian mid‐market. Current Canadian Debt Terms • Lenders continue to aggressively deploy capital into high quality deals. Outside of the quality of the borrower, lenders differentiate deals by size, relationship & sponsored vs. standalone transactions. • Incumbent lenders will often significantly improve their pricing and terms in competitive refinancing situations. • Large mid‐market deals can receive up to 4.25x (senior) / 6.00x (total) Debt / EBITDA; “typical” mid‐market financings are up to 3.00x‐3.75x senior / 4.25x‐4.75x total Debt / EBITDA range. Senior debt is now up to 50%‐65% of the capital structure. • Senior pricing is at Bankers’ Acceptance (0.9% on 13/03/15) + 1.50%‐3.50% at moderate to high leverage. Mezzanine pricing is at 12%‐17% total rate of return. • Conventional senior debt will have a 3‐7 year amortization with a 3‐5 year term. Mezzanine debt is normally a “bullet” with a 3‐5 year term. North American Private Equity (“PE”) Trends Healthcare • PE firms participated in nine North American M&A transactions related to the Healthcare sector in Q4 2014 which is slightly above the 2014 quarterly average of eight. This result is a 29% increase compared to Q3 2014 (seven transactions) but a decrease of 40% compared to Q4 2013 (15 transactions). There were an additional six non PE financial transactions. General (1) • Canadian buyout and PE transactions across all industries hit record levels in 2014. Control‐stake acquisitions, growth‐related and other PE deals (announced and completed) totaled 410, a 23% increase over 2013. Volume for Q4 2014 also increased to 105 transactions, up from 94 in Q3 2014. • The value of disclosed transactions (announced and completed) totaled CAD$32.2B in 2014, more than tripling the CAD$10.3B reported in 2013. Thirteen large‐cap deals sized CAD$500M or more captured 75% of all disclosed disbursements, CAD$100M to CAD$500M took 15% and deals less than CAD$100M took the rest. • The majority of Canadian transactions in 2014 (announced and completed) were based in Quebec (42%) followed by Ontario (24%) and Alberta (19%). Due to several large‐cap deals, Ontario led market activity in disclosed deal values taking just under half of all disbursements followed by Quebec and Alberta both receiving 23% of all disbursements. • In the international market, Canadian funds led or participated in a total of 112 deals which were valued at approximately CAD$44B. This compares to a total of 67 deals valued at CAD$19B reported in 2013. The United States accounted for over three‐quarters of disclosed transaction values and two‐thirds of all deals. Most of the remaining activity occurred in Europe and Latin America. Sources: (1) Canadian Venture Capital & Private Equity Association & Thomson Reuters CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. 10 CCC Investment Banking Q4 2014 About CCC Investment Banking Established in 1975, CCC is Canada’s leading independent middle market investment bank. CCC has a specialization in the North American Healthcare Industry. CCC provides advisory services in: Mergers & Acquisitions Management Buy‐outs Divestitures Financing Strategy and Placement Restructurings Strategic Reviews Valuations and Fairness Opinions CFI Network Contact Us – CCC is the exclusive Canadian member of Corporate Finance International (“CFI”), a global network of leading independent middle‐market investment banking firms with members or partners in North America, Western & Eastern Europe, Asia and South America – To find out how CCC can add value to your business, please contact our Healthcare coverage team: Bill Rogers, Managing Director and CEO • 416‐619‐9120 • [email protected] – CFI specializes in cross‐border transactions and has significant experience in the Healthcare sector Rob Bird, CPA, CA, CFA, Managing Director • 416‐619‐9117 • [email protected] Hugh Notman, Managing Director • 604‐689‐2495 • [email protected] Boris Tsimerinov, Vice President • 416‐619‐9125 • [email protected] We welcome your feedback. Let us know what you’d like to see in our next quarterly review. For more information on CCC, please visit: www.cccinvestmentbanking.com. Please see information on CFI’s Healthcare experience on our website. This market overview is not an offer to sell or solicit an offer to buy any security. It is not intended to be directed to investors as a basis for making an investment decision. This market overview does not rate or recommend securities of individual companies, nor does it contain sufficient information upon which to make an investment decision. The information provided in this market overview was obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not to be construed as legal, accounting, financial, or investment advice. Information, opinions, and estimates reflect CCC’s judgment as of the date of publication and are subject to change without notice. CCC undertakes no obligation to notify any recipient of this market overview of any such change. The charts and graphs used in this market overview have been compiled by CCC solely for illustrative purposes. All financial data and transaction summaries were collected from Capital IQ. This market overview is not directed to, or intended for distribution to, any person in any jurisdiction where such distribution would be contrary to law or regulation, or which would subject CCC to licensing or registration requirements in such jurisdiction. CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com. 11 Toronto Office 150 King Street West, Suite 2020, PO Box 20 Toronto, Ontario M5H 1J9 T: 416 599 4206 F: 416 599 9250 Vancouver Office 450 – 400 Burrard Street Vancouver, B.C. V6C 3A6 T: 604 689 2495 www.cccinvestmentbanking.com