Aeroflow looks to grow through strategic buys

ASHEVILLE, N.C. - What began as a way to expand nationally through subcontracting relationships in the competitive bidding program has turned into a full-blown acquisition strategy for Aeroflow Healthcare.

This year alone, the company has closed nine deals, says Andrew Amoth, strategic partnerships coordinator.

Amoth spoke with HME News recently about Aeroflow's growth strategy and why the provider uses multiple lenses to view potential acquisitions.

Shifting landscape

When the competitive bidding program launched, Aeroflow won contracts across the country, requiring the provider to develop subcontracting relationships with local companies. That didn't last beyond the first round of the program, says Amoth.

“With contract changes, we found there were a lot of scenarios where a DME had the bid before and then they didn't have it in the next round,” he said. “It brought about a lot of opportunity for asset purchases in the CPAP resupply space.”

Aeroflow then applied that model to other products that didn't require opening bricks-and-mortar locations, said Amoth.

“We still have our traditional DME footprint in the Southeast, but we are moving toward a pick, pack and ship model where appropriate,” he said. “We can grow from that footprint and service anywhere in the country with these types of acquisitions.”

Three lenses

Aeroflow uses three lenses when it values a potential acquisition: assets, revenue percentage and EBITA. That allows the provider to take a broader look at the seller's potential value, says Amoth.

“A lot of buyers will just look at the bottom line, or they will just look at the EBITA and do a multiple of that,” he said. “So if a provider is struggling on the bottom line, but we still see some value on the top line, we don't discount that. We really want the seller to feel we are valuing their business as they would.”

Volume game

To succeed in today's environment of compressed margins, companies have to build scale, says Amoth.

“As far as remaining profitable and looking at specific product lines, it is a volume game and trying to be strategic with relationships and with other providers,” he said. “It definitely takes a lot of agility to stay ahead in this market.”