Apollo Global Management and portfolio company RCCH HealthCare Partners have agreed to acquire LifePoint Health from the healthcare provider’s shareholders for an enterprise value of $5.6 billion, marking the latest big-ticket move for a private equity firm in the healthcare space. The add-on’s price of $65 per share represents a 36% premium to LifePoint’s closing share price last Friday.
A number of factors—including an aging population and the continued development of new drugs and devices to sell—have pushed private equity firms deeper into the healthcare space during the past several years. In the US, deal count in the sector more than doubled between 2008 and 2017, according to PitchBook data. The story’s even more extreme in the healthcare services sub-sector, where US deal count rose from 184 in 2008 to 445 last year.
In 2018, that increased appetite has resulted in several billion-dollar takeovers involving healthcare companies and private equity firms. Most notable is the trio of Humana, TPG Capital and Welsh, Carson, Anderson & Stowe, which have teamed this year to acquire Kindred Healthcare for $4.1 billion and Curo Health Services for $1.4 billion. KKR got in the act with a $2.4 billion add-on acquisition of American Medical Response, combining the business with portfolio company Air Medical Group to create a major provider of medivac and other medical transport services.
Apollo’s deal with LifePoint also continues a trend of private equity firms turning to add-ons with ever-increasing frequency. Buy-and-build deals are more popular so far in 2018 than at any point since the end of the financial crisis, as you can see in our recent datagraphic recapping PE activity in 2Q.
LifePoint and RCCH are both owners and operators of hospitals and other care providers throughout the US. The add-on is slated to create a business with some 60,000 employees, 12,000 licensed beds, 7,000 affiliated physicians and expected 2017 revenue of more than $8 billion. The combined company will retain the LifePoint name.
Check out a PitchBook analysis of the evolution of the buy-and-build strategy.
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