M&A analysts: ‘Focus on acquiring solid companies’

YARMOUTH, Maine – Industry analysts see steady deal-making in 2023, with a variety of companies making buys in both typically hot markets like respiratory and newly hot markets like repairs, but with more of a focus on due diligence. 

“I think the interest is at both the national level, as well as the larger regionals, aggressively pursuing acquisitions,” said Pat Clifford, managing director, home medical equipment, for The Braff Group. “There is acquisition appetite and I think the (attractive) market segments are the same, so it’s still respiratory, diabetes and supplies like wound care and urology that are making an uptick. If it’s recurring sales – buyers still like it.” 

At the top 

Two buyers, however, float to the top for Kevin Palamara, managing director at Provident Health Partners: Quipt, which recently bought the DME assets of Great Elm Healthcare; and Viemed, which recently added an executive vice president of acquisitions and strategic transactions. 

“Quipt Home Medical, in particular, is starting to become more of a force in the marketplace,” he said. “Viemed made some hires on the M&A side, and we expect them to be among the more active consolidators on the traditional respiratory side.” 

Niche interest 

Supply chain issues and a tightening economy have generated an “influx of interest” in niche companies that offer equipment repairs or other services, says Brendan Schroeder, an associate with Provident Health Partners. Repair Authority, for example, recently acquired Pitcock Biomedical, following its merger with MSC Biomedical Services last year. 

“That’s kind of intensified the focus on companies that have that skill set,” he said. “It’s harder to obtain new equipment and it’s more expensive to obtain new equipment. There’s an intensified focus on having availability of equipment and trying to extend the life of the equipment you have.” 

'Gray tsunami’ 

Buyers are also benefiting from a new group of sellers: Owners looking to retire, especially from smaller, mom-and-pop businesses, says Brad Smith, managing director and partner at Vertess. 

“Many of their businesses are going to have to start transitioning,” he said. “It’s the gray tsunami and we’re seeing more and more of that. We had several business transactions that had octogenarians that owned the business who were exiting out.” 

Due diligence 

One constant across all sectors: Buyers are taking their time, looking for companies with solid performance, and increasing their due diligence, says Jonathan Sadock, managing partner with Paragon Ventures.  

“There’s a continuing focus on acquiring solid companies that generate decent net income because there’s a lot of companies that don’t manage expenses well,” he said. “That makes it difficult for a buyer to put a valuation on a business that has weak earnings. It’s a much more intense process.”