M&A: Respiratory, complex rehab, resupply top buyer lists

YARMOUTH, Maine – Analysts expect the final months of 2021 to bring a flurry of deal-making as sellers try to get ahead of a possible increase in the capital gains tax in 2022. 

When President Biden released his proposed 2022 fiscal year budget earlier this year, it called for an increase to 39.6%, although the rates look more likely to settle around 25% or so, say analysts. 

“That has pulled some activity into 2021 for folks on the fence, so I think the fourth quarter could be busy with deals trying to meet the Dec. 31 deadline,” said Pat Clifford, managing director, home medical equipment, for The Braff Group.  

Across the board, the appetite of buyers, regardless of size, remains “extremely strong,” say analysts. 

“The corporate strategic buyers, the Aprias and the Rotechs of the world, they are all in acquisition mode, but there are also smaller regional buyers, like Medical Service Company, looking to take advantage of consolidation,” said Jonathan Sadock, managing partner/CEO of Paragon Ventures. “Then there are the private equity-backed deals, which have really grown.” 

With the ongoing COVID-19 pandemic, it’s no surprise that respiratory is a hot market, but other sectors remain attractive, as well, say analysts. Vertess Health completed five deals in September, including two in the complex rehab technology space, says Brad Smith, managing director/partner, who describes it as an “active space” with high multiples driven by consolidation. 

“You’ve got the big nationals (like National Seating & Mobility and Numotion), but there are a handful of smaller players that are exclusively CRT that are doing well and are growing through acquisition,” he said. “(But) that market is so consolidated it’s hard to find a lot of targets to go after.” 

Buyers are also looking for “roll through” product channels to complement their existing supply business, says Don Davis, president of Duckridge Advisors. 

“I think what’s happening is people are making a lot of money on resupplies of any type with recurring revenue, so they are looking to see what they can push through,” he said. “We know that diabetes supplies are hot – that’s something that several companies have mentioned getting more into. These companies are starting to build out from CPAP resupply.”