Buckle up, 2018 is going to be ‘huge’ for M&A, analysts say

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Friday, January 19, 2018

YARMOUTH, Maine – Expect to see large regional HME players get bigger in the year ahead as they look to increase their market share, say M&A analysts.

“These regionals are really looking to grow their territory,” said Brad Smith, managing director/partner at Vertess. “I think 2018 is going to be a huge year.”

And that’s building on a strong 2017. In the third quarter of last year, 18 transactions were completed in the HME sector, the highest since 2014, according to The Braff Group.

“I think both buyers and sellers are getting comfortable with where true valuations are,” said Patrick Clifford, a managing director at The Braff Group. “Valuations aren’t overly terrific, but they aren’t bottom fishers, either.”

Particularly active among the regionals: QMES, AeroCare and StateServ Medical, all of which received private equity financing in 2017.

They are being strategic, however, say analysts.

“You’ve got buyers like (AeroCare CEO) Steve Griggs that are out there looking for special situations,” said Rick Glass, president of Steven Richards & Associates. “I don’t see demand for broad-based companies coming back until we see some picking back up on the reimbursement front.”

That may not be all that far off, says Smith, who said many of the buyers he talks to feel reimbursement may have finally bottomed out.

“Right now, they can still buy on the cheap and gain tremendous market share,” he said. “In three years or five years—whenever it starts going up and DME becomes more desirable again—those guys will sell.”

Also showing signs of life are the four nationals, say analysts.

“Lincare has actually been making moves and I’ve even heard from Apria,” said Smith. “The big four nationals have been really active again and I think that’s going to translate into them becoming more active and more aggressive this year.”