Private equity investment in the gastroenterology space has recovered from COVID-19-related delays and is on fire to end 2020. So, what’s in store for 2021?
Here, Bill Bolding, senior analyst at Provident and Eric Major, director at Provident, offered insights on the current state of PE investment in GI and made predictions about what 2021 could look like.
Note: Responses were edited for style and content.
Question: 2020 was disrupted by COVID-19. Now, it seems the firms are making up for lost time. What’s driving the flurry of activity in November and December? Were these delayed deals that were reevaluated?
Bill Bolding, Eric Major: Yes, many of these transactions have been in the works since well before COVID-19 — some even dating back to 2019. GI M&A activity has rebounded due to a couple factors. First off, in the initial Q2 shutdowns, many groups saw patient volumes drop to as low as 25 percent of pre-COVID-19 levels. Nine months later, various regions of the country have re-entered shutdowns, albeit with much more flexibility for outpatient physician groups and their patients. This has allowed groups to sustain patient volumes close to pre-pandemic levels.
Second, the lender community, which provides the credit facilities that fund transactions at these attractive valuations, has become sufficiently comfortable with the market dynamics to allow deals to progress. At the initial onset of the pandemic, many lenders in the GI space adopted a ‘wait and see’ approach to deals or drawdowns in credit instead of allowing transactions to proceed at previously agreed upon valuations. Now that we have more insight into the timetable of vaccine distribution and the eventual end of lockdowns, lenders can fund deals with better foresight.
To access the full article, click on the following link: The biggest year to date — Why 2 analysts think big things are in store for GI M&A in 2021
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