1. society
2. welfare
3. healthcare

Healthcare Industry
Quarterly Review – Q3 2014 Contents:
M&A Trends
Public Market Valuation Metrics Bill Rogers, ICD.D
Managing Director & CEO
416‐619‐9120
brogers@cccinvestmentbanking.com
Robert Bird, CPA, CA, CFA
Managing Director
416‐619‐9117
rbird@cccinvestmentbanking.com
Hugh Notman
Managing Director
604‐689‐2495
hnotman@cccinvestmentbanking.com
Select Company Trading & Operating Metrics
Featured Transactions
Canadian Announcements
Canadian Banking and Private Equity Trends
December 2014
Introduction
Q3 2014
Welcome to CCC Investment Banking’s Healthcare Industry Review covering the third quarter of 2014. M&A Activity Levels – There were 101 announced or completed North American Healthcare transactions in the
third quarter of 2014 which is the industry’s lowest quarterly total dating back to early 2012. This is well below
the 121 total deals announced in the previous quarter as well as the 161 deals in Q3 2013. Only two Healthcare
sectors saw an increase in deal volume compared to the previous quarter with the Supplies sector increasing the
most at 13% followed by Equipment at 5%. The three sectors that experienced significant declines in volume
include the Facilities sector which dropped the most by 46% to 15 deals (its lowest quarterly total since 2012)
followed by Services at 33% to eight deals (its lowest quarterly total since 2009) and Technology at 12%. The
Distribution sector remained unchanged with an identical ten transactions compared to the previous quarter.
Overall Canadian M&A activity across all industries decreased to 270 change of control transactions in Q3 2014
which is an 8.5% decrease compared to Q2 2014 but an increase of 17% compared to Q3 2013.
Buyer Composition – There were seven announced Healthcare Private Equity (“PE”) deals in Q3 2014
representing 7% of the total deal activity in the quarter. This result matches the quarterly average of 7% in 2013.
There were also an additional nine non PE financial transactions while the remaining 85 deals were all
completed by strategic acquirers.
Canadian Deals – There were seven Canadian‐based Healthcare deals announced in Q3 2014 representing
approximately 7% of the North American Healthcare deal activity. This is consistent with the previous two year
quarterly average which typically represents between 7% and 10% of the North American Healthcare
transaction volume.
Public Market Valuations and Profit Margins – The Healthcare market experienced a slight gain in overall
market value. The CCC Healthcare Index increased by approximately 2.4% during Q3 2014 which follows a 2.1%
increase in Q2 2014. This minimal increase was slightly below the NASDAQ which rose by 3.2% but outgained
the S&P/TSX which fell by 1.4%. This can once again be directly attributed to the decrease of trading multiples in
four of the six Healthcare sectors. Overall profitability margins, as defined by sector median EBITDA1/Revenue,
experienced an increase in the Technology (+1.7%), Supplies (+1.5%), Equipment (+1.2%) and Distribution
(+0.2%) sectors. The only sector to witness a decrease involved the Facilities sector (‐0.5%) while the Services
sector remained unchanged. Enterprise Value/EBITDA1 multiples in four of the six subsectors experienced a
contraction compared to Q2 2014 with the Supplies sector decreasing the most (‐1.8x) followed by Equipment
(‐1.0x), Technology (‐0.9x) and Facilities (‐0.3x). The remaining two sectors both generated minor increases with
Distribution at (+0.5x) followed by Services at (+0.2x).
Thank you,
William (Bill) F. Rogers
Managing Director and CEO CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
Robert Bird, CPA, CA, CFA
Managing Director
1)
2
EBITDA: Earnings before interest, taxes, depreciation and amortization
M&A Trends
Q3 2014
Healthcare M&A Highlights
• 101 majority stake transactions were announced in Q3 2014, compared to 121 in Q2 2014, 138 in Q1 2014 and 161 in Q3
2013. This is the lowest quarterly total dating back to early 2012 and is a decrease of 37% compared to Q3 2013.
• Three of the six Healthcare sectors saw a decrease in deal volume compared to the previous quarter. The biggest
decrease involved the Facilities sector which dropped by 46% to 15 transactions. This is well below the 2014 first half
average of 30 Facility deals. Other declines include Services at 33% and Technology at 12%. Only two sectors increased in
deal volume with Supplies increasing by 13% followed by Equipment at 5%. The Distribution sector remained unchanged.
• Average transaction value for all deals with disclosed values under US$500M equaled US$62M which is a decrease of 22%
compared to US$79M in Q2 2014. This average is just slightly below the 2013 quarterly average of US$66M. Of these
deals, there were 11 (or 34% of all reported deals) between US$50M and US$500M.
Q3 2014 North American Healthcare Deal Volume by Sector
Distribution
10%
Technology
37%
Q3 12 Q4 12
Equipment
21%
101
Services
8%
Annual Annual Q1 13 Q2 13 Q3 13 Q4 13
Q1 14 Q2 14 Q3 14
2012
2013
Technology
30
49
148
30
30
31
37
128
34
43
38
Distribution
11
20
53
10
6
12
11
39
13
10
10
Equipment
31
34
105
29
27
26
28
110
35
20
21
Facilities
38
40
123
20
31
70
40
161
31
28
15
Supplies
6
12
30
6
6
9
10
31
9
8
9
Services
16
20
63
15
14
13
22
64
16
12
8
132
175
522
110
114
161
148
533
138
121
101
Total
Facilities
15%
Supplies
9%
Historical Quarterly North American Healthcare Deal Volume by Size(1) and Geography
$80
180
160
140
120
100
80
60
40
20
0
$70
$60
$50
$40
$30
$79 $57 $79 $76 $63 $20
$62 $48 $49 $10
$0
14
10
8
13
9
14
7
161
151
102
12
136
125
100
112
94
Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014
(1) Average transaction value for all deals with disclosed values under US$500M
Canada
US
Sector Definitions
Equipment: Medical equipment, home Healthcare equipment, testing,
analyzing and diagnostic equipment, therapeutic devices and dental
equipment
Distribution: Healthcare equipment and product distribution
Facilities: Assisted living facilities
CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
3
Technology: Technology products and services targeting the
Healthcare industry
Services: Medical laboratories and rehabilitation centres
Supplies: Medical consumables, instruments and optical supplies
Public Market Valuation Metrics
Q3 2014
The charts below show North American Q3 2014 EV/EBITDA and EBITDA/Revenue by sector.
Median Q3 2014 LTM EV/EBITDA by Sector
#(1) Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
Services
Services
Facilities
Distribution
Equipment
Supplies
Technology
8.9x
Facilities
10.4x
Distribution
11.6x
Equipment
12.0x
Supplies
12.2x
12
14
9
58
32
22
8.1x
10.7x
10.2x
10.5x
12.6x
13.8x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
7.7x
13.0x
11.7x
13.5x
15.0x
15.5x
8.4x
15.6x
12.6x
13.7x
13.9x
16.5x
8.7x
10.7x
11.1x
13.0x
14.0x
18.1x
8.9x
10.4x
11.6x
12.0x
12.2x
17.2x
(1) # of publicly traded companies identified
17.2x
Technology
8.1x
11.7x
10.5x
12.1x
12.8x
14.5x
18.0x
20.0x
Median Q3 2014 LTM EBITDA/Revenue
#(1) Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14
Distribution
Distribution
Facilities
Services
Technology
Equipment
Supplies
4.5%
Facilities
9.6%
Services
14.9%
Technology
15.1%
Equipment
18.9%
Supplies
20.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
9
14
12
22
58
32
2.6%
13.2%
14.9%
12.9%
17.8%
20.1%
3.4%
13.8%
14.1%
14.8%
18.0%
19.4%
3.4%
13.8%
14.1%
13.8%
17.4%
20.0%
3.4%
10.9%
14.4%
14.3%
17.0%
19.5%
4.3%
10.1%
14.9%
13.4%
17.7%
18.6%
(1) # of publicly traded companies identified
22.0%
Below is a chart comparing the CCC Healthcare Index to the performance of the NASDAQ Composite Index and the
S&P/TSX Composite Index. This chart depicts the percentage change in the index value from January 1, 2011 to
September 30, 2014.
80%
70%
60%
50%
40%
30%
20%
10%
0%
‐10%
‐20%
CCC Healthcare Index
S&P/TSX Composite Index ‐ Index Value
* The index is comprised of 54 Healthcare stocks selected by the CCC Healthcare team
CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
4
4.5%
9.6%
14.9%
15.1%
18.9%
20.1%
NASDAQ Composite Index (^COMP) ‐ Index Value
Select Company Trading and Operating Metrics
Ticker
Company
Stock Price
30-Sep-14
(US$)
Technology
NasdaqGS: ATHN
TSX:CCT
NasdaqGS:CERN
NasdaqGS:MDAS
NasdaqGS:QSII
Total
Enterprise
Value
(TEV)
52 Week
High
Low
Total
Debt
LTM
Revenue
Q3 2014
LTM
EBITDA
EBITDA
Margin
Total
Debt to
LTM
EBITDA
TEV / LTM TEV / LTM
Revenue(1) EBITDA(1)
(US$ millions)
athenahealth, Inc.
Catamaran Corporation
Cerner Corporation
MedAssets, Inc.
Quality Systems Inc.
$131.69 $206.70
$42.19 $52.62
$59.57 $63.07
$20.72 $26.58
$13.77 $24.15
$97.30
$36.25
$48.39
$19.38
$13.69
$5,107
$9,462
$19,483
$2,035
$713
$213
$1,437
$147
$909
$0
$711
$20,371
$3,181
$692
$462
$59
$806
$841
$207
$41
8%
4%
26%
30%
9%
3.58x
1.78x
0.17x
4.38x
‐
Avg.
7.18x
0.46x
6.12x
2.94x
1.54x
3.65x
86.03x
11.74x
23.15x
9.81x
17.19x
29.58x
Becton, Dickinson and Company
Boston Scientific Corporation
CONMED Corporation
Hologic Inc.
ResMed Inc.
$113.81 $120.66
$11.81 $14.08
$36.84 $50.47
$24.33 $26.75
$49.27 $57.34
$98.30
$11.12
$32.95
$19.25
$41.52
$23,163
$19,552
$1,193
$10,396
$6,301
$3,971
$4,252
$248
$4,302
$376
$8,432
$7,331
$743
$2,509
$1,578
$2,164
$1,638
$124
$888
$483
26%
22%
17%
35%
31%
1.84x
2.60x
2.00x
4.84x
0.78x
Avg.
2.75x
2.67x
1.61x
4.14x
3.99x
3.03x
10.70x
11.94x
9.61x
11.70x
13.04x
11.40x
ATRION Corp.
DENTSPLY International Inc.
Haemonetics Corporation
Utah Medical Products Inc.
West Pharmaceutical Services, Inc.
$305.01 $337.25 $252.50
$45.60 $50.99 $42.99
$34.92 $44.20 $29.86
$48.76 $60.89 $44.52
$44.76 $51.12 $39.11
$553
$7,829
$2,087
$174
$3,298
$0
$1,380
$430
$6
$347
$140
$2,957
$935
$41
$1,414
$49
$584
$108
$19
$267
35%
20%
12%
46%
19%
‐
2.36x
3.96x
0.32x
1.30x
Avg.
3.95x
2.65x
2.23x
4.22x
2.33x
3.08x
11.19x
13.42x
19.23x
9.18x
12.38x
13.08x
AmerisourceBergen Corporation
Cardinal Health, Inc.
Owens & Minor Inc.
McKesson Corporation
PharMerica Corporation
$77.30 $79.13 $60.78
$74.92 $77.74 $52.05
$32.74 $38.55 $31.71
$194.67 $200.00 $128.84
$24.43 $30.48 $13.24
$18,078 $1,996 $119,569
$26,325 $4,007 $90,631
$2,192
$766
$9,267
$53,439 $10,572 $161,201
$992
$361
$1,822
$1,374
$2,390
$237
$3,557
$115
1%
3%
3%
2%
6%
1.45x
1.68x
3.23x
2.97x
3.13x
Avg.
0.15x
0.29x
0.24x
0.33x
0.54x
0.31x
13.16x
11.01x
9.25x
15.02x
8.61x
11.41x
Equipment
NYSE:BDX
NYSE:BSX
Nasdaq:CNMD
NasdaqGS:HOLX
NYSE:RMD
Supplies
NasdaqGS:ATRI
Nasdaq:XRAY
NYSE:HAE
NasdaqGS:UTMD
NYSE:WST
Distribution
NYSE:ABC
NYSE:CAH
NYSE:OMI
NYSE:MCK
NYSE:PMC
Facilities
TSX:ACC
NYSE:BKD
NYSE:CSU
NYSE:KND
TSX:LW
Amica Mature Lifestyles Inc.
Brookdale Senior Living Inc.
Capital Senior Living Corp.
Kindred Healthcare Inc.
Leisureworld Senior Care Corp.
$8.09
$36.18
$26.89
$26.81
$12.49
$6.09
$25.46
$19.90
$13.13
$9.10
$647
$8,459
$1,222
$2,702
$981
$465
$6,415
$666
$1,497
$558
$128
$2,931
$367
$5,081
$393
$34
$522
$57
$291
$55
26%
18%
15%
6%
14%
13.69x
12.30x
11.70x
5.15x
10.15x
Avg.
5.19x
2.89x
3.32x
0.53x
2.50x
2.89x
19.63x
16.21x
21.46x
9.30x
17.84x
16.89x
$28.06 $37.97
$16.78 $18.93
$101.75 $108.77
$23.20 $26.00
$60.68 $64.38
$24.13
$7.35
$87.01
$19.69
$50.46
$818
$1,678
$11,186
$485
$12,630
$60
$1,157
$3,015
$65
$3,893
$797
$1,970
$5,936
$690
$7,308
$97
$154
$1,138
$56
$1,397
12%
8%
19%
8%
19%
0.62x
7.50x
2.65x
1.17x
2.79x
Avg.
1.03x
0.85x
1.88x
0.70x
1.73x
1.24x
8.41x
10.87x
9.83x
8.69x
9.04x
9.37x
$6.16
$32.22
$21.23
$19.40
$12.00
Services
*
NasdaqGS:BRLI
NasdaqGS:GTIV
NYSE:LH
NasdaqGS:LHCG
NYSE:DGX
Bio‐Reference Laboratories Inc.
Gentiva Health Services Inc.
Laboratory Corp. of America Holdings
LHC Group, Inc.
Quest Diagnostics Inc.
Notes:
As at September 30, 2014
(1) All trading multiples based upon trading currency
Source: Capital IQ
* Quarterly Company Featured: Cardinal Health, Inc.
Sector: Distribution
Location: Dublin, Ohio, United States
Website: www.cardinalhealth.com
Description: Cardinal Health is a distribution and services company that improves the cost‐effectiveness of Healthcare. The company provides pharmaceuticals and medical products to more than 60,000 locations each day. The company is also a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company supports the growing diagnostic industry by supplying medical products to clinical laboratories and operating the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
5
Featured Transactions
Q3 2014
Technology
Technology (cont’d)
– Quebec‐based TELUS Health Solutions Inc. agreed to acquire
Quebec‐based XD3 Solutions Inc. on September 17, 2014. XD3
provides dispensary management software solutions for
pharmacists. In a related transaction, TELUS also acquired the
Canadian operations of ZRx Prescriber Technology from Zoomed
Inc. (TSXV:ZMD) for CAD$6.8M on September 3, 2014.
– South Carolina‐based 3D Systems Corp. (NYSE:DDD), a provider
of 3D printing centric design‐to‐manufacturing solutions,
acquired Cleveland‐based Simbionix USA Corporation from
various investors for US$120M in cash on August 28, 2014.
Simbionix provides simulation, training and education solutions
for medical professionals and the Healthcare industry.
– Minnesota‐based provider of information and technology‐
enabled health services Optum, Inc., a subsidiary of United
HealthCare Services, Inc., agreed to acquire Texas‐based
MedSynergies, Inc. on September 30, 2014. MedSynergies
provides physician practice management, revenue management,
physician referral management and other business services to
physician groups.
– Florida‐based manufacturer of medical imaging products and
software, Roper Industries, Inc. (NYSE:ROP), acquired California‐
based Strategic Healthcare Programs, LLC, a Web‐based
Healthcare technology company, from Level Equity
Management, LLC and Cressey & Company, LP on August 26,
2014.
– Boston‐based Medical Professional Mutual Insurance Company
acquired Maryland‐based ELM Exchange, Inc., a provider of
online medical‐legal education solutions for physicians on
August 11, 2014.
– Louisville‐based
health
information
connectivity
and
management solutions company ZirMed Inc. acquired Chicago‐
based MethodCare, Inc. on September 25, 2014. MethodCare
provides cloud‐based predictive analytics solutions.
– San Francisco‐based Practice Fusion, Inc., a provider of cloud‐
based electronic health records for doctors, acquired San
Francisco‐based Telethrive, Inc. from various investors on
August 6, 2014. Telethrive provides patient‐doctor
communication tools.
– Nashville‐based Healthcare services provider HCA Holdings, Inc.
(NYSE:HCA) agreed to acquire Chicago‐based PatientKeeper, Inc.
from various investors on September 23, 2014. PatientKeeper
provides Healthcare software applications for clinical and
financial workflows to physicians.
– Tennessee‐based contract management solutions provider
TractManager, Inc., also known as MediTract, Inc., acquired
Dallas‐based MD Buyline, Inc. from SFW Capital Partners on
August 4, 2014. MD Buyline provides supply chain management
solutions to hospitals and Healthcare providers.
– Boston‐based MedAssets, Inc. (NasdaqGS:MDAS), a financial and
performance Healthcare improvement company, acquired
Illinois‐based Sg2, LLC from various investors for approximately
US$140M on September 22, 2014. Sg2 offers analytics, consulting
and educational solutions to the Healthcare industry.
– Alabama‐based Source Medical Solutions, Inc., a provider of
ambulatory surgery center and therapy software, acquired
Connecticut‐based Encircle Healthcare Management, LLC on
July 31, 2014. Encircle provides Web‐based tools to automate
communications between Healthcare organizations.
– San Diego‐based Golden Hour Data Systems, a provider of
integrated solutions for the emergency medical transportation
industry, acquired Pittsburgh‐based emsCharts Inc., a provider of
electronic Healthcare data collection on September 17, 2014.
– U.S. PE firm GTCR, LLC acquired San Diego‐based XIFIN, Inc., a
provider of health economics solutions to the Healthcare
diagnostics industry, on July 30, 2014.
– New Jersey‐based information technology (IT) provider Cognizant
Technology Solutions Corporation (NasdaqGS:CTSH) agreed to
acquire Colorado‐based TriZetto Corporation from TZ Holdings,
L.P. for US$2.7B in cash on September 14, 2014. TriZetto provides
IT and service solutions for various Healthcare sectors.
– Maryland‐based GetWellNetwork, Inc., a provider of interactive
patient care and engagement solutions, acquired Marbella
Technologies, Inc. on July 29, 2014. Marbella provides an
automated patient‐rounding solution that improves perception‐
of‐care for hospitals.
– California‐based Google Inc. (NasdaqGS:GOOGL) acquired
medical technology creator Lynx Design, Inc. from Rock Health
and others on September 10, 2014.
– Minnesota‐based Medtronic, Inc. (NYSE:MDT), a manufacturer
of device‐based medical therapies, acquired a 91.43% stake in
Houston‐based Visualase, Inc. for US$99M from Eventi Capital
Partners on July 28, 2014. Visualase manufactures laser and
image‐guided technologies for thermal ablation markets.
– Charlotte‐based Premier, Inc. (NasdaqGS:PINC), a Healthcare
performance improvement alliance of hospitals and providers,
acquired North Carolina‐based Aperke, Inc. for US$48.5M in cash
on August, 29, 2014. Aperke provides Web‐based analytics and
savings solutions for the Healthcare supply chain. In a related
transaction, Premier also acquired Utah‐based TheraDoc, Inc.
from Hospira Inc. (NYSE:HSP) for approximately US$120M in cash
on September 1, 2014. TheraDoc develops electronic surveillance
systems for real‐time injury detection and protection.
CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
– New York‐based provider of Web‐based medical information
and education Medscape, LLC acquired North Carolina‐based
TheraSim, Inc. in July 2014. TheraSim provides a virtual patient
simulation platform for the assessment of Healthcare workers.
6
Featured Transactions
Q3 2014
Equipment
Equipment (cont’d)
– Swedish‐based ADDvise Lab Solutions AB (OM:ADDV) agreed to
acquire Massachusetts‐based Surgical Tables Incorporated for
US$2.55M on September 17, 2014. The deal represents a Total
Enterprise Value (“TEV”) to Last Twelve Months (“LTM”) EBITDA
of 16.6x and TEV to LTM Revenue of 0.9x.
– Minnesota‐based St. Jude Medical Inc. (NYSE:STH), a
manufacturer of medical devices for cardiac rhythm
management, acquired NeuroTherm, Inc. from various
investors for approximately US$200M in cash on August 7, 2014.
NeuroTherm manufactures minimally invasive solutions for pain
management.
– Massachusetts‐based manufacturer of aesthetic treatment
systems Cynosure, Inc. acquired New York‐based Ellman
International, Inc. from Baird Capital Partners and others for
US$13.2M in cash on September 5, 2014. Ellman manufactures
surgical devices for medical, dental and veterinary procedures.
Assisted Living Facilities and Services
– Mississauga‐based
Chartwell
Retirement
Residences
(TSX:CSH.UN), an independent real estate investment trust
(REIT), acquired Quebec‐based Jardins Notre‐Dame for
CAD$21.8M in cash on July 3, 2014. Jardins Notre‐Dame
comprises a 151‐suite living retirement residence.
– California‐based Veracyte, Inc. (NasdaqGM:VCYT), a diagnostic
company in the field of molecular cytology, acquired
Massachusetts‐based Allegro Diagnostics Corp. from various
investors for US$20.2M on September 4, 2014. Allegro develops
genomic tests for diagnosis of lung cancer and lung diseases.
– Boston‐based Civitas Solutions, Inc. (NYSE:CIVI), a provider of
home and community‐based health and human services to
must‐serve individuals, acquired Massachusetts‐based Mass
Adult Day Health Alliance on September 29, 2014.
– U.S. PE firm RockWood Equity Partners acquired Minnesota‐
based Altimate Medical, Inc. from Invacare Corporation
(NYSE:IVC) for US$23M in cash on August 29, 2014. Altimate
manufactures standing frames and equipment to improve the
quality of life for kids and adults using wheelchairs.
– U.S. PE firm Chicago Pacific Founders, a firm specializing in
Healthcare investments, acquired a majority stake in Grace
Management, Inc. on September 28, 2014. Grace Management
provides third‐party senior housing management services.
– Ireland‐based Healthcare product manufacturer Covidien plc
(NYSE:COV) acquired California‐based Sapheon, Inc. from Main
Line Equity Partners, LLC on August 28, 2014. Sapheon develops
medical devices for the treatment of venous reflux disease. In a
related transaction, Covidien also acquired California‐based
medical device company Reverse Medical Corporation from a
group of sellers on August 22, 2014.
– South Carolina‐based Wilson Senior Care, Inc. acquired South
Carolina‐based Loris Rehab and Nursing Center, LLC on
September 26, 2014.
– University of Pittsburgh Medical Center agreed to acquire
Pennsylvania‐based Jameson Health System, Inc. on September
16, 2014. Jameson Health operates as an independent not‐for‐
profit community Healthcare system in Pennsylvania.
– German‐based developer of test systems for laboratory and
autoimmune diagnostics ORGENTEC Diagnostika GmbH agreed to
acquire Colorado‐based medical diagnostic solutions provider
Corgenix Medical Corporation for US$15M on August 27, 2014.
The deal represents a TEV to LTM EBITDA of 18.1x and a TEV to
LTM Revenue of 1.1x.
– California‐based REIT HCP, Inc. (NYSE:HCP) and Tennessee‐
based Brookdale Senior Living Inc. (NYSE:BKD) acquired the
Florida‐based Freedom Village of Bradenton, LLC, a continuing
care retirement community, for US$53M on September 3, 2014.
– Pennsylvania‐based Genesis HealthCare, LLC, an operator of
skilled nursing centres and senior living communities, agreed to
acquire California‐based Skilled Healthcare Group, Inc.
(NYSE:SKH) from Onex Corporation (TSX:OCX) and others on
August 18, 2014. Skilled Healthcare, through its subsidiaries,
operates skilled nursing facilities.
– Massachusetts‐based medical device contract manufacturer
Tecomet, Inc. acquired Florida‐based 3D Medical Manufacturing,
Inc. from various investors on August 22, 2014. 3D Medical
manufactures custom medical implants and devices. In a related
transaction, Tecomet also agreed to acquire the OEM Solutions
business segment of Indiana‐based Symmetry Medical, Inc.
(NYSE:SMA), a manufacturer of medical device solutions and
surgical instruments, from BlackRock Fund Advisors and others
for US$450M in cash on August 4, 2014. The deal represents a
TEV to LTM EBITDA of 8.7x and a TEV to LTM Revenue of 1.1x.
– U.S.‐based 360 L.L.C. agreed to acquire Philadelphia‐based Deer
Meadows Retirement Community in a stalking horse bid for
US$30.3M on July 25, 2014.
– U.S.‐based Aviv REIT, Inc. acquired two assisted living facilities,
one skilled nursing facility and two parcels of land in
Massachusetts for US$94.2M on July 10, 2014.
– Ohio‐based specialty chemical company The Lubrizol
Corporation, a subsidiary of Berkshire Hathaway Inc.
(NYSE:BRK.A), acquired Wisconsin‐based medical device contract
manufacturer Vesta Inc. from RoundTable Healthcare
Management, LLC on July 31, 2014.
CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
– U.S.‐based NorthStar Healthcare Income, Inc. acquired Four
Senior Living Facilities in Long Island, New York from Five Long
Island Properties, LLC for approximately US$130M on July 7,
2014.
7
Featured Transactions
Q3 2014
Distribution
Services (cont’d)
– Quebec‐based manufacturer and distributor of accessibility
equipment Savaria Corporation (TSX:SIS) acquired Ontario‐based
Silver Cross for CAD$4.7M on September 11, 2014. Silver Cross
sells and distributes new and recycled accessibility equipment for
the Healthcare industry.
– An unknown buyer offered to acquire Atlanta‐based Gentiva
Health Services Inc. (NasdaqGS:GTIV) for approximately
US$640M on July 17, 2014. Gentiva provides home health,
hospice and community care services in the U.S. The deal
represents a TEV to LTM EBITDA of 11.9x and a TEV to LTM
Revenue of 0.9x.
– California‐based Healthcare company ALPHAEON Corporation
agreed to acquire Ontario‐based Clarion Medical Technologies
Inc. for US$55M in cash and stock on September 8, 2014. Clarion
distributes aesthetic, ophthalmic and surgical products for
hospitals and clinics in Canada.
– Florida‐based NeoGenomics, Inc. (NasdaqCM:NEO), an operator
of cancer‐focused testing laboratories, acquired California‐
based Path Logic, Inc. for US$5.9M on July 8, 2014. Path Logic
provides anatomic pathology services in the U.S. and reported
revenues of approximately US$10M in 2013.
– Ontario‐based medical and surgical product distributor Canadian
Hospital Specialties Ltd. acquired Montreal‐based Inter V
Medical Inc. from Entrepreneur Capital Inc. on September 3,
2014. Inter V distributes medical products to hospitals in Canada.
– Memphis‐based Shelby Residential and Vocational Services, Inc.
acquired Memphis‐based Special Kids and Families, Inc., a
family‐centered early intervention program, on July 9, 2014.
– Memphis‐based gas and medical equipment supplier nexAir LLC
acquired Atlanta‐based Cal East Company, Inc. on September 2,
2014. Cal East distributes medical gases and supplies to dentists
and other medical professionals.
– Washington‐based Incyte Diagnostics, a provider of anatomic
diagnostic services, acquired Seattle‐based Accupath
Laboratory Services, Inc. on July 3, 2014. Accupath provides
clinical and anatomic pathology services.
– U.S. PE firm Graham Partners acquired Utah‐based HemaSource
Holdings, LLC from various investors on July 24, 2014.
HemaSource distributes medical disposable products and
selected items that are used in blood therapies markets.
Supplies
– U.S. PE firm Wind Point Partners acquired Minnesota‐based
Vision‐Ease Lens, Inc. from Insight Equity and Rosewood Private
Investments on September 17, 2014. Vision‐Ease manufactures
and sells ophthalmic lenses.
– Wisconsin‐based manufacturer of continuous passive motion
equipment and related devices Kinex Medical Company, LLC
acquired Wisconsin‐based Advanced Bracing Plus, LLC and
Arakansas‐based Isokinetics Inc. in the third quarter of 2014.
Advanced Bracing supplies non‐invasive medical equipment and
Isokinetics sells consumer and professional medical products.
– Former Alere Inc. executives, led by ex‐CEO Ron Zwanziger,
have made an offer to acquire the remaining 95.83% stake in
Alere Inc. (NYSE:ALR) for US$3.6B in cash on September 15,
2014. Alere provides point‐of‐care diagnostics and supplies for
cardiology, infectious disease, toxicology and diabetes. The deal
represents a TEV to LTM EBITDA of 13.8x and TEV to LTM
Revenue of 2.6x.
Services
– Louisville‐based PharMerica Corporation (NYSE:PMC), an
institutional pharmacy services company, acquired Illinois‐based
Millennium Pharmacy Systems, Inc. from various investors on
September 26, 2014. Millennium provides pharmacy services for
the long‐term care industry.
– U.S.‐based PE firm LDI Ltd., LLC acquired Minnesota‐based
UltiMed, Inc. on August 29, 2014. UltiMed, doing business as
Ulticare, manufactures medical supplies for use in clinics,
nursing homes and flu clinics in the U.S. and internationally.
– California‐based medical device manufacturer Amsino
International, Inc. acquired the Receptal Line of Products from
Hospira Inc. (NYSE:HSP) on August 15, 2014. The line of products
comprises suction medical products.
– U.S. PE firms Longitude Capital Management Co., LLC and
NovaQuest Capital Management, L.C.C., acquired California
Cryobank on August 19, 2014. California Cryobank operates as a
sperm bank providing reproductive tissue, donor semen, private
reproductive tissue storage and andrology services.
– Ohio‐based Nordson Medical Corporation, a subsidiary of
Nordson Corporation (NasdaqGS:NDSN) and a manufacturer of
biomaterial delivery systems and tubing components, acquired
California‐based Avalon Laboratories Holding Corp. from
American Capital Equity Management LLC , American Capital,
Ltd. (NasdaqGS:ACAS) and others for US$180M on August 11,
2014. Avalon engages in the development and manufacture of
medical devices and supplies for surgical and minimally invasive
procedures worldwide.
– Maryland‐based Professional SportsCare & Rehab acquired
Southern Delaware Physical Therapy and Maryland‐based
Professional SportsCare & Rehab on August 4, 2014. Following
these acquisitions, Southern Delaware Physical Therapy,
Maryland SportsCare & Rehab, Professional Physical Therapy &
SportsCare, Professional SportsCare & Rehab and Littlestown
Physical Therapy & SportsCare are merging to form Pivot Physical
Therapy.
CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
8
North American Announcements & Trends
Canadian Organ Transplants
Q3 2014
Organs Required by Canadians in 2012
• 2,225 organ transplants were made in Canada in 2012 (most up to date
annual statistics), up almost 5% over 2011.
• Deceased donors totaled 540 compared to 539 live donors, making
2012 the first year where deceased donors outnumbered live ones.
• Between 2003 to 2012, the rate of deceased organ donors has risen by
17%.
• Deceased donors can actually provide up to eight organs, while a living
donor can provide only one.
• There were 15.5 deceased organ donors in Canada per million
population in 2012, compared to 26 per million in the U.S. and 36 per
million in Spain, the country with the highest donation rate.
• 232 Canadians died waiting for an organ transplant in 2012, while 4,612
were waiting for organs at the end of the year.
• By the end of 2012, there were more than 41,000 people living with
end‐stage kidney disease, 42% with a kidney transplant and 58% on
dialysis.
• The Canadian Institute for Health Information states that transplants
improve outcomes and quality of life for patients compared to dialysis,
and they also have a cost benefit (e.g. a person living with a kidney
transplant costs the Healthcare system approximately $50,000 less).
Source: The Canadian Press (December 2014), Canadian Institute for Health Information
Donations and Needs
Lungs
Heart
15
69
194
164
183
329
Kidneys
Liver
62
84
1,358
494
492
3,428
17,438 Canadians had a working kidney transplant
Waiting List
Deaths While Waiting
Taxes Paid by Canadian Families for Public Health Insurance in 2014
• A recent study performed by the Fraser Institute (using
data from Statistics Canada and the Canadian Institute for
Health Information) examined the amount of taxes
Canadian families will pay for public health insurance in
2014 and their increase over the past decade. The study is
aimed to allow Canadians to understand exactly how
much Healthcare personally costs them.
• According to the study, Canadian families will pay on
average between $3,592 to $11,786 for public health
insurance in 2014, depending on the size of their family.
• Over the past 10 years, Healthcare insurance for the
average Canadian family has increased:
• 1.5 times faster than average income.
• 1.3 times as fast as the cost of housing.
• 1.6 times as fast as clothing costs.
• More than three times as fast as the cost of food.
• As for the average cost for public health insurance among different income groups:
• the 10% of families with the lowest income will pay an average of $523 for public health insurance in 2014.
• the 10% of families with an average income of $57,818 will pay an average of $5,522 in 2014.
• families in the top 10% of income earners will pay $37,239 for public health insurance in 2014.
• The average single Canadian earning $42,000 will pay $4,381 for public health insurance in 2014.
Source: Fraser Institute (July 2014), Statistics Canada, Canadian Institute for Health Information
CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
9
23,814 on dialysis
Transplants
Canadian Banking and Private Equity Trends
Q3 2014
We are including some general Canadian PE and banking trends. Although some of the trends may not be specific to Healthcare, they are a barometer of M&A and financing activity in the general Canadian mid‐market.
Current Canadian Debt Terms
• Lenders continue to aggressively deploy capital into high quality deals. Outside of the quality of the borrower,
lenders differentiate deals by size, relationship & sponsored vs. standalone transactions.
• Incumbent lenders will often significantly improve their pricing and terms in competitive refinancing
situations.
• Large mid‐market deals can receive up to 4.25x (senior) / 6.00x (total) Debt / EBITDA; “typical” mid‐market
financings are up to 3.00x‐3.75x senior / 4.25x‐4.75x total Debt / EBITDA range. Senior debt is now up to 50%‐65%
of the capital structure.
• Senior pricing is at Bankers’ Acceptance (1.25% on 17/12/14) + 1.50%‐3.50% at moderate to high leverage.
Mezzanine pricing is at 12%‐17% total rate of return.
• Conventional senior debt will have a 3‐7 year amortization with a 3‐5 year term. Mezzanine debt is normally a
“bullet” with a 3‐5 year term.
North American Private Equity (“PE”) Trends
Healthcare
• PE firms participated in seven North American M&A transactions related to the Healthcare sector in Q3 2014 which
is once again slightly lower than the 2013 quarterly average of ten. This results in a 12% decrease compared to both
Q2 and Q1 2014 (eight transactions in both quarters) as well as a decrease of 36% compared to Q3 2013 (11
transactions). There were an additional nine non PE financial transactions.
General
• Overall Canadian buyout and PE transactions across all industries decreased slightly in Q3/14. Control‐stake
acquisitions, minority investments and other PE deals (announced and completed) totaled 94 transactions. This is a
decrease of 9% compared to Q2/14 but an increase of 40% year over year.
• The amount of disclosed transaction volume (announced and completed) totaled CAD$19.8B in Q3/14, due primarily
to the CAD$12.5B merger of Tim Hortons with 3G Capital‐backed Burger King Worldwide Inc., one of the largest
international buyout deals so far this year. Even without the Tim Hortons transaction, buyout and PE funds totaled
CAD$7.3B for the quarter which greatly exceeds the CAD$1.2B that was reported for the same period in 2013.
• For the first nine months of 2014, the majority of Canadian transactions were based in Quebec (45%) followed by
Ontario (23%) and Alberta (19%). Once again because of the Tim Hortons‐Burger King deal, Ontario moved into first
spot when it comes to disclosed values. The province took 59% of all disbursements followed by Alberta with 21%
and Quebec 15%.
• U.S. PE deal making continued to increase in the first nine months of 2014 with disclosed values totaling close to
US$100B which is up 3% year over year.
Sources: Canadian Venture Capital & Private Equity Association
Thomson Reuters
CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
10
CCC Investment Banking
Q3 2014
About CCC Investment Banking
Established in 1975, CCC is Canada’s leading independent middle market investment bank. CCC has a specialization in the North American Healthcare Industry. CCC provides advisory services in:

Mergers & Acquisitions  Management Buy‐outs  Divestitures  Financing Strategy and Placement  Restructurings  Strategic Reviews  Valuations and Fairness Opinions
CFI Network
Contact Us
– CCC is the exclusive Canadian member of Corporate Finance International (“CFI”), a global network of leading independent middle‐market investment banking firms with members or partners in North America, Western & Eastern Europe, Asia and South America
– To find out how CCC can add value to your business, please contact our Healthcare coverage team:
Bill Rogers, Managing Director and CEO
• 416‐619‐9120
• brogers@cccinvestmentbanking.com
– CFI specializes in cross‐border transactions and has significant experience in the Healthcare sector
Rob Bird, CPA, CA, CFA, Managing Director
• 416‐619‐9117
• rbird@cccinvestmentbanking.com
Hugh Notman, Managing Director
• 604‐689‐2495
• hnotman@cccinvestmentbanking.com
We welcome your feedback. Let us know what you’d like to see in our next quarterly review.
For more information on CCC, please visit: www.cccinvestmentbanking.com.
Please see information on CFI’s Healthcare experience on our website.
This market overview is not an offer to sell or solicit an offer to buy any security. It is not intended to be directed to investors as a basis for making an investment decision. This market overview does not rate or recommend securities of individual companies, nor does it contain sufficient information upon which to make an investment decision.
The information provided in this market overview was obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not to be construed as legal, accounting, financial, or investment advice. Information, opinions, and estimates reflect CCC’s judgment as of the date of publication and are subject to change without notice. CCC undertakes no obligation to notify any recipient of this market overview of any such change. The charts and graphs used in this market overview have been compiled by CCC solely for illustrative purposes. All financial data and transaction summaries were collected from Capital IQ. This market overview is not directed to, or intended for distribution to, any person in any jurisdiction where such distribution would be contrary to law or regulation, or which would subject CCC to licensing or registration requirements in such jurisdiction.
CCC’s Healthcare specialists can help to add value to your business. Please contact Bill Rogers, Rob Bird or Hugh Notman or visit www.cccinvestmentbanking.com.
11
Toronto Office
150 King Street West, Suite 2020, PO Box 20
Toronto, Ontario M5H 1J9
T: 416 599 4206 F: 416 599 9250
Vancouver Office
450 – 400 Burrard Street
Vancouver, B.C. V6C 3A6
T: 604 689 2495
www.cccinvestmentbanking.com