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May 28, 2020

Nashville Health Care Council Presents “Financing the Deal” Virtual Panel

Nashville Health Care Council Presents “Financing the Deal” Virtual Panel

Last Thursday, the Nashville Health Care Council hosted their annual event, “Financing the Deal: Deal-Making Trends and Strategies for Health Care Companies,” featuring expert financial executives discussing current and future investment trends. The panel participants provided inside perspectives on the state of the market, the impact of the coronavirus on deal flow and trending sectors to watch.

The conversation was moderated by Tom Wylly, senior partner, Brentwood Capital Advisors. Panelists included Geoffrey G. Clark, senior managing director, Starr Investment Holdings; Bruce Crosby, co-founder and managing partner, Health Velocity Capital; Ann Lamont, co-founder and managing partner, Oak HC/FT; and Scott Poole, partner, Ridgemont Equity Partners.

Wylly began the discussion with background on health care deal activity from the last 18 months, explaining the number and the dollar volume of deals had decreased in 2019 and, in the first quarter of 2020, health care mergers and acquisitions dropped another 10% and the dollar value of those deals was down 77%.

“So you can see the M&A market has been weakening over the last few years and was really put on life support with COVID-19,” he said. Wylly then asked the panelists to characterize their deal flow prior to the coronavirus and describe the impact of the pandemic on their portfolio companies.

Poole said the impact to his firm’s portfolio companies has varied widely depending on the business, with about half of the companies being largely unaffected. For struggling companies, they have furloughed staff and cut salaries. “Other businesses have had very different experiences,” he said. “For example, we have two health care distribution businesses, one that delivers defibrillators. Historically, defibrillator demand has grown 10% per year, but demand is down in this environment. For those customers, we’re now selling personal protective equipment. We created a whole new product portfolio of masks, gloves, gowns, hand sanitizer, wipes and more, which has filled the hole from the defibrillator demand slow-down.”

According to Crosby, digital health was a very robust market in the first quarter of 2020, with $3.1 billion invested in digital health companies, according to Rock Health. “Like most, once COVID-19 hit, we retreated and focused on our portfolio. Now we’re slowly moving out of it,” said Crosby. “We’re invested in MDLive, one of the largest telehealth platform companies. Like other telehealth companies, they’ve seen a tremendous growth in volume and benefited from the coronavirus. On the other side of the spectrum, we have companies that sell software to health systems and we expect sales to be slow for three to sixth months until hospitals get back on their feet.”

Lamont referred to the coronavirus as “an accelerant” for investment trends such as primary care, home care and digitizing health care services. “Right now, you don’t want to be in an institution like a nursing home or hospital unless you have to be. You want to stay home and have all the support at home. Just like everyone has gotten used to using Zoom, the reality is whether it’s mental or physical health, the coronavirus has changed the dynamic between the clinician and the patient.”

Clark said his firm’s health care portfolio companies took the hardest hit between mid-March and mid-April but are recovering quickly with volumes up 50% to 75% in the last four weeks. “We are seeing an aggressive snapback. The question we wrestle with is when will this start to level out? What does pandemic recovery look like? At this point no one knows the answer. The other question is what will the practice of health care look like? COVID-19 has been the biggest accelerator of change I’ve seen in 25 years of investing, not just in health care but across business processes and spending.”

Looking ahead, the panelists identified key factors needed to close new deals and valuation expectations post-coronavirus. They agreed it will take time for the financing markets and valuations to look like they did pre-coronavirus.

“From a valuation perspective, sometimes it takes time,” said Clark, who is looking for high-quality and high-growth assets and market leaders “Like the real estate market, it will take sellers time to come to terms with reasonable valuations.”

Poole indicated confidence in forward-looking projections and predictability are key. Crosby mentioned that while Zoom videoconferencing aids communication, face-to-face meetings with the management team are critical so investments may be delayed until travel habits resume. Lamont agreed and suggested the exception to that rule is investing in company executives and businesses that the firm already knows.

To conclude, the panelists identified several sectors with growth potential. Crosby expressed interest in the behavioral health and substance use disorder spaces and referenced investments with Ginger, a text-based virtual behavioral health company, and Spero Health, a Nashville-based addiction treatment organization. Poole is also interested in behavioral health, alongside specialty home infusion services and post-acute care. Clark identified tech-enabled companies and organizations that address the “pain points” of health care such as physician staffing. Lamont reiterated her interest in primary care and companies embracing digitization to expand access to care.

The Nashville Health Care Council will continue to offer relevant and timely virtual events during the COVID-19 pandemic. Register now for the next installment in the Council’s virtual series, “Health Care Brass Tacks” on Tuesday, June 2, at 11:30 a.m. Watch for more information on this and upcoming programs at

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