INDUSTRY Blue Book Hp Healthcare Providers 2Q15 Segment: CROSSTREE C A P I T A L P A R T N E R S
Introduction Crosstree Capital Partners provides mergers and acquisitions and financing advisory services exclusively to middlemarket businesses operating within three health care industry groups Diagnostics & Tools, Drug & Device Outsourcing, and Healthcare Providers. Having spent more than a decade building the market intelligence, relationships and experience necessary to get our clients the best deal possible, we have advised clients on five continents and consistently lead the market each year in closing successful transactions. Our firm has relationships with nearly every active institutional investor and most active buyers in the market, and we also foster relationships with innovative, emerging private companies in the industry. Using our proprietary integrated information systems, we produce these quarterly Blue Books as a means of sharing a portion of the market intelligence that we gather and maintain. We hope that you find them to be valuable resources. www.crosstreecapital.com
Industry Segment Health Systems Acute Care Specialty Acute Care Ancillary Services Healthcare Providers Residential Care Facilities Medical Practices www.crosstreecapital.com 2
Segment and Subsegment Definitions The Crosstree segment comprises acute care hospitals ranging from community hospitals to major regional medical centers, specialty hospitals that provide niche acute care services, and hospitalbased health systems involving multiple facilities and potentially spanning the entire range of services in the Healthcare Providers continuum, from other inpatient and residential facilities to outpatient practices and ancillary services. Subsegment Definitions Acute Care The Acute Care subsegment consists of inpatient medical facilities, ranging from small community hospitals to major regional medical centers, offering a variety of acute care services, including emergency departments, trauma centers, burn units, surgery departments and specialist units, such as cardiology, intensive care, neurology, oncology, and obstetrics and gynecology. can be owned and operated by the public sector, by charities and other nonprofit organizations, or by corporate, institutional or individual shareholders and may be affiliated with a medical school, nursing school or university, combining treatment of patients with training of medical students and nurses. The subsegment includes Healthcare Providers organizations involving either multiple acute care hospitals or a central acute care medical center affiliated with a variety of other in and outpatient care providers, such as residential care facilities, ambulatory surgery centers and medical practices, and ancillary services providers. These organizations allow for integrated delivery systems, enhanced reputations, increased market share, diversification of payor mix, extended geographic reach, consolidation and centralization of administrative functions, leveraging of systems over a larger base of facilities, more effective physician recruitment, and participation in networks. Specialty Acute Care The Specialty Acute Care subsegment includes acute care inpatient facilities that provide niche services. Examples of such facilities include longterm acute care hospitals, acute inpatient psychiatric facilities, inpatient surgery centers, cancer centers and heart hospitals. These facilities provide intensive health services to patients requiring continuous observation, intervention and direct involvement of physicians. www.crosstreecapital.com 3
Public Equity Index The following valueweighted equity index, updated through the end of 2Q15, is the Crosstree Capital Partners Index, composed of the stocks of companies that operate within the industry subsegments comprising Acute Care,, and Specialty Acute Care. To be included in the index, constituents must maintain a market capitalization of at least $50 million and generate at least 30% of their revenue from activities. Crosstree Capital Partners Index 350 300 250 200 150 100 50 Crosstree Capital Partners Index Statistics Date Price Date Index Value % Change Qtr/Qtr 06/30/2013 06/28/2013 141.2 09/30/2013 09/30/2013 148.6 5.2% 12/31/2013 12/31/2013 161.4 8.6% 03/31/2014 03/31/2014 174.4 8.1% 06/30/2014 06/30/2014 191.2 9.6% 09/30/2014 09/30/2014 225.2 17.8% 12/31/2014 12/31/2014 233.6 3.7% 03/31/2015 03/31/2015 240.4 2.9% 06/30/2015 06/30/2015 284.5 18.3% Source: Crosstree Capital Partners, Inc. Acadia Healthcare Company, Inc. (NasdaqGS:ACHC) Community, Inc. (NYSE:CYH) HCA Holdings, Inc. (NYSE:HCA) Index Constitutuents Kindred Healthcare Inc. (NYSE:KND) LifePoint Health, Inc. (NasdaqGS:LPNT) Select Medical Holdings Corporation (NYSE:SEM) Tenet Healthcare Corp. (NYSE:THC) Universal Health Services Inc. (NYSE:UHS) www.crosstreecapital.com 4
Public Equity Valuation Metrics The following table presents valuation statistics, as multiples of revenue, EBITDA and EBITDAR, of the publicly traded companies that compose the Crosstree Capital Partners Index, as of the end of 2Q15. Enterprise value equals equity market value (market capitalization), plus net debt, plus preferred stock, minus cash and cash equivalents. Valuation Multiples, 2Q15 1,2 Company Name EV/LTM Revenue EV/LTM EBITDA EV/LTM EBITDAR Community, Inc. (NYSE:CYH) 1.3x 8.6x 7.5x HCA Holdings, Inc. (NYSE:HCA) 1.8x 8.8x 8.8x LifePoint Health, Inc. (NasdaqGS:LPNT) 1.2x 9.7x 9.0x Tenet Healthcare Corp. (NYSE:THC) 1.1x 8.7x 7.7x Universal Health Services Inc. (NYSE:UHS) 2.1x 11.4x 10.7x Mean 1.5x 9.4x 8.7x Median 1.3x 8.8x 8.8x Specialty Acute Care Acadia Healthcare Company, Inc. (NasdaqGS:ACHC) 6.5x 31.4x 29.6x Kindred Healthcare Inc. (NYSE:KND) 0.9x 13.2x 7.1x Select Medical Holdings Corporation (NYSE:SEM) 1.2x 10.6x 7.2x Mean 2.9x 18.4x 14.6x Median 1.2x 13.2x 7.2x Combined Mean 2.0x 12.8x 11.0x Combined Median 1.3x 10.2x 8.3x Source: Crosstree Capital Partners, Inc. 1 NM Not Meaningful 2 Multiples calculated on data available at the close of the quarter www.crosstreecapital.com 5
Public Equity Valuation Metrics The following graph presents the median enterprise value to EBITDA multiple of the companies in the Crosstree Capital Partners Index for each of the trailing eight quarters. Historical EBITDA Multiples 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 2013 2014 2015 www.crosstreecapital.com 6
Private Placements The following table presents selected data on disclosed private equity placements that occurred during 2Q15 and involved target companies operating within the industry segment, providing details on the investor type, the transaction date, status and size (where available), and the industry subsegment and geographic region of the target. Private Equity Placements, 2Q15 Date Closed Status 1 Target 05/11/2015 C Evansville Physicians' S Corp. Target Geography Industry Subsegment Investor Type Size ($mm) Great Lakes Acute Care Undisclosed Investors 1.8 04/21/2015 C Rural Physicians Group Southwest Acute Care Institutional Investors Source: Crosstree Capital Partners, Inc. 1 C complete; P pending The following graphs summarize 2Q15 disclosed private equity placement volume and placement value by subsegment, as a percentage of the industry segment placement volume and placement value totals. Private Placement Volume by Subsegment Private Placement Value by Subsegment Acute Care Acute Care 100% 100% www.crosstreecapital.com 7
Private Placement Metrics The following graphs summarize 2Q15 disclosed private equity placement volume and placement value by geographic region, as a percentage of the industry segment placement volume and placement value totals. Private Placement Volume by Region Private Placement Value by Region Southwest 50% 50% Great Lakes Great Lakes 100% The following graph summarizes total monthly disclosed private equity placement value and placement volume for the industry segment over the trailing 12 months. Private Placement Value and Volume by Month Value ($mm) 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 1.2 1.0 0.8 0.6 0.4 0.2 Volume Value Volume www.crosstreecapital.com 8
Private Placement Metrics The following graph summarizes total quarterly disclosed private equity placement value and placement volume for the industry segment over the trailing four quarters. Private Placement Value and Volume by Quarter Value ($mm) 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 Qtr3 Qtr4 Qtr1 Qtr2 2014 2015 Value Volume 2.5 2.0 1.5 1.0 0.5 Volume www.crosstreecapital.com 9
Mergers & Acquisitions The following table presents selected data on disclosed M&A transactions that were announced during 2Q15 and involved target companies operating within the industry segment, providing details on the identity of the buyer, the transaction date, status and size (where available), and the industry subsegment and geographic region of the target. M&A Transactions, 2Q15 Date Announced Status1 Target 06/17/2015 C Noble, Inc. 06/16/2015 P Parkview Adventist Medical Center 06/15/2015 P Victory Medical Center MidCities, LP 06/12/2015 C Basin Healthcare Center, LLC 06/09/2015 P Columbus Hospital LTACH LLC 06/05/2015 C Dakota Plains Surgical Center, LLP 06/01/2015 C Grayson County Physicians Property, LLC (majority stake) 05/31/2015 P Saint Louis University Hospital 05/28/2015 C Chino Valley Medical Center, PLLC and Troyer Urgent Care 05/28/2015 P Pocono Health System, Inc. 05/14/2015 P Watertown Regional Medical Center, Inc. (majority stake) Target Geography Industry Subsegment Buyer Size ($mm) Northeast Acute Care Baystate Mary Lane Hospital Corporation United Acute Care Mid Coast Hospital States Various Southwest Acute Care Undisclosed Investors Southwest Acute Care Odessa Regional Medical Center Northeast Midwest Southwest Specialty Acute Care Specialty Acute Care Specialty Acute Care Quantum International 29.0 Income Corp. Avera St. Luke's Hospital 36.9 Texas Health Venture Heritage Park, LLC Midwest Acute Care St. Louis University Endowment United Acute Care NextCare, Inc. States Various Great Lakes Lehigh Valley Health Network, Inc. Great Lakes LifePoint Health, Inc. 05/11/2015 C Skiff Medical Center Midwest Acute Care Catholic Health Initiatives and Mercy Health Network, Inc. 05/09/2015 P Victory Healthcare Plano Hospital Southwest Acute Care Nobilis Health Corp. 12.5 05/04/2015 C Southwest Regional Medical Center Great Lakes Acute Care The Washington Hospital 25.9 www.crosstreecapital.com 10
Mergers & Acquisitions M&A Transactions, 2Q15 (Continued) Date Announced Status1 Target 05/01/2015 P Greater Waterbury Health Network, Inc. 04/28/2015 P St Joseph's Hospital Health Center 04/24/2015 P Franklin Primary Health Center, Inc.; Primary care practice in downtown Canton 04/21/2015 P Optim Healthcare (majority stake) 04/18/2015 C Victory Medical Center Houston, LP (majority stake) 04/10/2015 C Houston Orthopedic & Spine Hospital 04/08/2015 C St. Louis Regional Psychiatric Stabilization Center 04/06/2015 P AHS Medical Holdings LLC Source: Crosstree Capital Partners, Inc. Target Geography Industry Subsegment Buyer Size ($mm) Northeast Prospect Medical Holdings, Inc. Northeast Acute Care Trinity Health United States Various Southeast Southwest Southwest Midwest Acute Care Specialty Acute Care Specialty Acute Care Specialty Acute Care Specialty Acute Care MedWest Health System, Inc. National Specialty, Inc. Nobilis Health Corp. 3.9 Memorial Hermann Healthcare System, Inc. BJC Health System, Inc. Southeast Ventas, Inc. 1,750.0 1 C complete; P pending www.crosstreecapital.com 11
Mergers & Acquisitions Metrics The following graphs summarize 2Q15 disclosed M&A transaction volume and transaction value by subsegment, as a percentage of the industry segment transaction volume and transaction value totals. M&A Transaction Volume by Subsegment M&A Transaction Value by Subsegment 18% Acute Care 5% 1% 50% Specialty Acute Care Specialty Acute Care 32% 94% All Others The following graphs summarize 2Q15 disclosed M&A transaction volume and transaction value by geographic region, as a percentage of the industry segment transaction volume and transaction value totals. M&A Transaction Volume by Region M&A Transaction Value by Region Southwest 14% 9% 27% Midwest Northeast 6% Southeast 14% Various 18% 18% Great Lakes 94% Various Southeast www.crosstreecapital.com 12
Mergers & Acquisitions Metrics The following graph summarizes total monthly disclosed M&A transaction value and transaction volume for the industry segment over the trailing 12 months. M&A Transaction Value and Volume by Month Value ($mm) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 12.0 10.0 8.0 6.0 4.0 2.0 Volume Value Volume The following graph summarizes total quarterly disclosed M&A transaction value and transaction volume for the industry segment over the trailing four quarters. M&A Transaction Value and Volume by Quarter Value ($mm) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 Qtr3 Qtr4 Qtr1 Qtr2 2014 2015 Value Volume 30.0 25.0 20.0 15.0 10.0 5.0 Volume www.crosstreecapital.com 13
Upcoming Conferences Our bankers attend the major global Healthcare Providers industry conferences. The following table contains a chronological listing of upcoming Healthcare Providers conferences that our bankers will be attending, covering the Health Systems, Residential Care Facilities, Medical Practices, and Ancillary Services segments. Crosstree Capital Partners Healthcare Providers Conference Schedule Conference Dates Location AHCA/NCAL 66th Annual Convention & Expo October 47, 2015 San Antonio, TX MGMA 2015 Annual Conference October 1114, 2015 Nashville, TN ANESTHESIOLOGY 2015 October 2428, 2015 San Diego, CA AAO 2015 November 1417, 2015 Las Vegas, NV American Academy of Dermatology 74th Annual Meeting March 48, 2016 Washington, DC Hospital Medicine 2016 March 69, 2016 San Diego, CA National Council for Behavioral Health Conference 16 March 79, 2016 Las Vegas, NV National Urgent Care Convention 2016 April 1720, 2016 Orlando, FL AHA Annual Meeting May 14, 2016 Washington, DC ASCA 2016 May 1922, 2016 Dallas, TX 2016 NEXT Conference & Exposition June 811, 2016 Nashville, TN Call us to schedule a confidential appointment James C. Hilton, Ph.D., CFA Head of Healthcare Providers 8137744754 james.hilton@crosstreecapital.com www.crosstreecapital.com www.crosstreecapital.com 14
Recent Crosstree Transactions Crosstree has a dedicated and exclusive focus on the Diagnostics & Tools, Drug & Device Outsourcing and Healthcare Providers industries. Since inception, the firm has been a consistent leader within our focus areas, closing more than 50 successful transactions worth more than a billion dollars in transaction value, with companies ranging from private equitybacked consolidators to Fortune 50 publiclytraded companies. In the process, we have represented clients on five continents, and more than 40% of our transactions have been crossborder. Ten of our recent deals are highlighted below. Acquired by Acquired by Acquired by Received a strategic investment from Merged with July 2015 July 2015 May 2015 September 2014 July 2014 Acquired by Acquired by Acquired by Acquired by Acquired by June 2014 October 2013 June 2013 May 2013 March 2013 Call us to schedule a confidential appointment James C. Hilton, Ph.D., CFA Head of Healthcare Providers 8137744754 james.hilton@crosstreecapital.com www.crosstreecapital.com www.crosstreecapital.com 15
Crosstree Publications Each quarter Crosstree publishes Industry Blue Books for each of our three industries Diagnostics & Tools, Drug & Device Outsourcing and Healthcare Providers along with separate Blue Books for each of the four to seven segments composing each industry, for a combined total of 18 quarterly Blue Books. In addition, we publish weekly Industry Blue Sheets, concise summary pieces covering the latest two weeks of private placement and M&A transactions for each of our three industries. All of these publications are available for download or subscription on our website. Crosstree Capital Partners Weekly Industry Blue Sheets Dt Do Hp Diagnostics &Tools Healthcare Providers Crosstree Capital Partners Quarterly Industry Blue Books Dt Do Diagnostics &Tools Drug & Device Outsourcing Industry Overview Industry Overview Hp Healthcare Providers Industry Overview Dt Diagnostics &Tools Diagnostic Services Dt Diagnostics &Tools In Vitro Diagnostics Dt Diagnostics &Tools In Vivo Diagnostics Do Drug & Device Outsourcing Discovery Do Drug & Device Outsourcing Development CDMO Do Drug & Device Outsourcing Hp Healthcare Providers Hp Healthcare Providers Residential Care Facilities Hp Healthcare Providers Medical Practices Dt Diagnostics &Tools Life Sciences Tools Do Drug & Device Outsourcing Laboratory Hp Healthcare Providers Ancillary Services Do Drug & Device Outsourcing Logistics Do Drug & Device Outsourcing Sales & Communication Do Drug & Device Outsourcing Technology To download or subscribe, visit www.crosstreecapital.com/publications/ www.crosstreecapital.com 16
Industry Blue Book, 2Q15 This page intentionally left blank Please contact us for more information James C. Hilton, Ph.D., CFA Head of Healthcare Providers 8137744754 james.hilton@crosstreecapital.com www.crosstreecapital.com www.crosstreecapital.com 18
www.crosstreecapital.com James C. Hilton, Ph.D., CFA Head of Healthcare Providers 8137744754 james.hilton@crosstreecapital.com www.crosstreecapital.com Although the information in this sales literature has been obtained from or is based upon data from sources Crosstree Capital Partners, Inc. believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This sales literature is for informational purposes only and is not intended as an offer or solicitation of the purchase or sale of a security. All securities transactions are offered by and conducted through Crosstree Capital Securities, LLC, a brokerdealer registered with the SEC, a member of FINRA (www.finra.org) and SIPC (www.sipc.org), and an affiliate of Crosstree Capital Partners. 2015 Crosstree Capital Partners, Inc. All rights reserved.