M&A forecast: Respiratory dominates, but providers look to ‘do more’ 

YARMOUTH, Maine – The theme for buyers and sellers in 2021 is “respiratory, respiratory, respiratory,” said Don Davis, president of Duckridge Advisors. 

Helping to drive that trend: AdaptHealth, which capped off a busy 2020 by announcing in December that it would acquire AeroCare, which specializes in CPAP, nebulizers, oxygen and ventilators, for nearly $2 billion in cash and shares. 

“It’s perfect iteming – the demographics are there, but with COVID and sleep issues being discussed, I see vents, CPAP and even oxygen companies having a lot of momentum behind them,” Davis said.  

While AdaptHealth may have captured the headlines in 2020, other companies have also been making buys and securing investments to position themselves for further growth. National player Rotech Healthcare announced it had obtained $425 million in financing, and regional players Great Elm Capital and Protech Home Medical announced $37.7 million in financing and several acquisitions, respectively. All four companies have a strong respiratory core. 

In fact, it’s the regional companies that might drive a good chunk of the M&A activity this year, says Brad Smith, managing director/partner at Vertess. 

“A lot of people are looking to retire and sell,” said Brad Smith, managing director/partner at Vertess. “Even though COVID has been good for our industry in certain ways, it’s still created a lot of uncertainty and risk and it’s a lot of work. A lot of these owners see security and safety in (regional) organizations.” 

In addition to respiratory, analysts are also seeing demand for diabetes, hospice DME and other product categories that have recurring revenues or that treat conditions with co-morbidities, says Pat Clifford, managing director, home medical equipment for the Braff Group. But even in those cases, respiratory is still the primary driver, as buyers seek to offer a more well-rounded product mix once again. 

“If you have a vent patient and they have incontinence, you are seeing folks try to take care of (both needs) for that patients,” he said. “It cycles all the time, and we are entering a cycle where people are doing more.”