2018 Global Healthcare Private Equity Transactions: 715 Deals Worth $103.72 Billion

Recently, Forbes released the top ten private equity deals in the healthcare sector for 2018. VCBeat (WeChat ID: vcbeat) has compiled and translated the details of these top ten private equity transactions for our readers’ benefit.

2018 was a bumper year for venture capital financing in the healthcare industry, as well as a record-breaking year for private equity transactions.

According to PitchBook data, as of mid-December 2018, a total of 715 private equity transactions were completed, with a total value of $103.72 billion. In 2017, there were 709 private equity transactions, totaling $88.87 billion, while in 2016, there were 651 transactions valued at $70.5 billion. Compared with the 413 transactions totaling $31.52 billion in 2013, both the number and scale of private equity transactions have risen significantly in recent years.

The Healthcare Research Institute of PricewaterhouseCoopers (PwC) predicts that this trend will continue in 2019, driven by the rise in private equity investment across the broader economy and healthcare management’s pursuit of divestitures for departments or subsidiaries deemed non-core to their primary business.

Karen Young, U.S. Pharmaceuticals and Life Sciences Leader at PwC, stated, “We are seeing many companies raising capital through private equity and divesting a significant number of non-core assets.” However, she believes that this growth is driven by companies that have already made substantial investments both within and outside the healthcare industry, rather than by new entrants.

“They aspire to be partners in the industry, rather than just bankers. I believe this is a factor driving the improvement of fundraising relationships, as well as contributing to better outcomes for high-value deals,” said Karen Young.

Below are the top 10 private equity deals in the healthcare sector in 2018:

Envision Healthcare was one of the most controversial healthcare companies in 2018 and also the company with the largest private equity acquisition amount that year.

Kohlberg Kravis Roberts acquired emergency care outsourcing provider Envision Healthcare for a total of $9.9 billion, comprising $46 per share plus assumed debt. Earlier this year, Envision sold its ambulance operations unit, American Medical Response, to a consortium of private equity firms including KKR for $2.4 billion. The company’s CEO stated that public market investors did not fully understand the company.

“The healthcare sector is fraught with complexities, particularly when it comes to insurance and managed care, making it difficult for ordinary investors to assess these risks and form appropriate perspectives,” said Christopher Holden, CEO of Envision, in an interview. “Private investors tend to have a longer-term horizon and are more knowledgeable than public investors.”

In November 2018, Veritas Capital and Evergreen Coast Capital announced the acquisition of athenahealth for $5.7 billion in cash.

Upon completion of the transaction, Veritas and Evergreen expect to combine athenahealth with Virence Health (an asset of GE Healthcare acquired by Veritas Capital earlier in 2018). The merged company will become a leading private healthcare information technology company, boasting an extensive nationwide customer network and world-class products and solutions to help clients thrive in an increasingly complex environment.

The combined company will operate under the athenahealth brand, with its headquarters in Watertown, Massachusetts. The new entity will be jointly led by Bob Segert, Chairman and CEO of Virence Health, along with an executive team from both companies. Virence Health’s workforce management business will become a standalone portfolio company of Veritas Capital under API Healthcare.

Ramzi Musallam, CEO and Executive Partner of Veritas Capital, stated: “athenahealth is a market leader with a natural strategic fit with Virence. They offer differentiated and complementary solutions, have established deep relationships with their respective customer bases, and share an innovation-driven corporate culture. We will fully leverage our expertise in this sector, along with the capabilities and solutions of both companies, to deliver greater value to customers, shape the future of healthcare IT for our teams, and create more growth opportunities for employees of both organizations.”

In November 2018, LifePoint Health announced the completion of its merger with RCCH HealthCare Partners (“RCCH”). RCCH is owned by certain funds managed by affiliates of Apollo Global Management LLC (NYSE: APO) and its consolidated subsidiaries (“Apollo”). Following the merger, LifePoint’s common stock ceased trading on the Nasdaq Stock Market and was delisted.

Following the merger, the two companies will operate under the name LifePoint Health, with a nationwide presence across 85 non-urban communities, encompassing regional health systems, physician practices, outpatient centers, and post-acute care facilities.

“Following the merger, we have officially become a healthcare organization dedicated to delivering high-quality, community-based medical services, working together to provide superior care to our patients. We possess deep expertise in helping healthcare providers in non-urban areas succeed, and with our market scale, healthcare experience, resources, and momentum, we are poised to become a leading force in future community healthcare reform,” said David Dill, CEO of LifePoint.

“The U.S. healthcare delivery system is undergoing rapid change, and we must take steps to ensure that non-urban communities across the country have access to high-quality medical care,” said Marty Rash, former CEO of RCCH HealthCare Partners. “The merger of these two companies has created a healthcare organization capable of making a significant impact on our patients and communities in the coming years.”

In December 2017, a consortium comprising TPG Capital, Welsh, Carson, Anderson & Stowe, and Humana Inc. announced that it would acquire Kindred Healthcare in an all-cash transaction at $9 per share, for a total value of $4.1 billion.

Kindred Healthcare operates home health, hospice and community care businesses, long-term acute care (LTAC) hospitals, inpatient rehabilitation facilities (IRFs), and contract rehabilitation services.

Following the acquisition of Kindred Healthcare, its home health, hospice, and community care businesses were separated from Kindred to form a new company operating as an independent entity, with Humana holding a 40% stake and TPG and WCAS holding a 60% stake. Kindred’s LTAC hospitals, IRFs, and contract rehabilitation services businesses will operate as independent specialty hospitals under TPG and WCAS.

Benjamin A. Breier, President and CEO of Kindred, stated, “This agreement maximizes shareholder value and represents a significant step forward in transforming home healthcare in the United States by improving access to medical services and reducing costs for patients with chronic conditions. Furthermore, Kindred Healthcare will be uniquely positioned to serve populations with complex medical needs and those requiring intensive rehabilitation.”

Kohlberg Kravis Roberts (KKR) portfolio company Air Medical Group Holdings (AMGH) is acquiring Envision Healthcare Corporation’s (Envision) medical transportation subsidiary, American Medical Response (AMR), for $2.4 billion in cash, with the two parties merging to create a new industry-leading medical transportation company.

The combination of AMGH and AMR will create an integrated medical transportation company capable of serving patients through multiple modes of transport when needed. The merged company will annually transport more than 5 million patients via air and ground ambulances across 46 states and the District of Columbia.

Christopher A. Holden, President and Chief Executive Officer of Envision, stated, “We are pleased to have identified a strong partner for AMR. The Envision leadership team has conducted a rigorous review of AMR’s strategic options. This agreement fulfills our commitment to uphold AMR’s esteemed legacy, enabling Envision to focus on its physician-centric strategy and continuum-of-care services, including facility-based provider services, post-acute care, and ambulatory surgery.”

In April 2018, Fresenius Medical Care (FMC), a German medical company providing dialysis services, sold its majority stake in Sound Inpatient Physicians Holdings for $2.15 billion to an investment consortium led by the private equity firm Summit Partners. The transaction was completed at the end of 2018 and generated approximately €800 million ($983 million) in pre-tax book gains for Fresenius Medical Care.

Fresenius Medical Care, the world’s largest provider of dialysis products and services, acquired a stake in Sound Inpatient for approximately $600 million in 2014, as part of the group’s initiative to expand its portfolio of kidney dialysis-related services.

Sound Inpatient provides services such as emergency medical care and intensive care. FMC stated that this investment enabled it to gain in-depth insights into value-based healthcare services in the United States. The company is now divesting its Sound Inpatient business and will use the proceeds from the sale for other investments.

Private equity firm Platinum Equity acquired LifeScan, Johnson & Johnson’s blood glucose monitoring subsidiary, for $2.1 billion, marking another step in J&J’s exit from the diabetes device market.

Since 2012, sales in Johnson & Johnson’s diabetes device business (including Animas Corp. and Calibra Medical Inc.) have been on a downward trend amid intense market competition. In January 2017, the company initiated a strategic review of these divisions.

In October 2018, Johnson & Johnson announced that it would shut down Animas, its insulin pump manufacturing unit, due to the inability to find a buyer. Currently, Johnson & Johnson is conducting a strategic review of its Calibra division, which markets wearable insulin pumps.

Headquartered in Pennsylvania, LifeScan sells personal blood glucose meters, test strips, and testing systems. Its products are currently used by more than 20 million people across 90 countries and regions.

In July 2018, Humana, private equity firm TPG Capital, and Welsh, Carson, Anderson & Stowe acquired Curo Health Services from Thomas H. Lee Partners for $1.4 billion.

Humana to Acquire 40% Minority Stake in Curo Health Services, Marking Its Latest Move to Expand Outpatient Care for Seniors and Complement Its Growing Medicare Advantage Business

Curo Health Services is a hospice care company that provides medical care, pain management, and emotional and spiritual support to families. Currently, the company primarily delivers hospice services to patients in 245 locations across 22 states.

Two weeks before the acquisition of Curo Health Services was finalized, Humana completed its acquisition of Kindred at Home. In this $4 billion deal, Humana was also a member of a consortium that included TPG and Welsh, Carson, Anderson & Stowe.

Humana and the aforementioned private equity firms stated in a joint release that the consortium intends to combine Curo Health Services with Kindred at Home’s hospice business to create the nation’s largest hospice operator.

In 2018, private equity firm Altamont Capital Partners acquired U.S. nutritional supplement company Juice Plus+ for $1.235 billion.

Juice Plus was founded in 1970 by Jay Martin, a former teacher. What began as a small direct-sales company has since grown into a highly profitable, multi-million-dollar enterprise with operations in more than 20 countries.

In April 2018, private equity firm Altaris Capital Partners acquired medical technology company Analogic Corp. for $1.1 billion in cash. The transaction, which was completed in June 2018, was subject to international commercial practices and customary closing conditions.

Analogic is a leading provider of healthcare and security solutions, with its imaging technology used in CT and MRI scans as well as in automated threat detection systems for aviation security.

Following the completion of the acquisition, Analogic became a privately held company, and its shares are no longer traded on the NASDAQ Stock Market.