Asahi’s Push Into the EU Beer Market (not China, not the U.S.)

Last week’s announcement of Asahi Group’s acquisition of the British beer business of Fuller, Smith & Turner marks Asahi’s third substantial beer acquisition in Europe since 2016. This deal further supports Asahi’s international expansion goals, but is this push strategic? Reactive? Opportunistic? Why has Asahi ignored the U.S. craft beer market (and craft beer in general), and why not focus on the massive growing beer market in neighboring China?

First off, the Fuller’s Beer Company division (including soft drink production and wine distribution) had been growing nicely and garnered a frothy multiple of nearly 24x EBITDA, so this was not a distressed carve-out. Further, the acquisition comes at a time when many Japanese companies have responded negatively to Brexit but are announcing plans to move operations to continental Europe. Asahi, which markets dozens of beer, spirits, and food brands, is making good on a promise to generate 35% of operating profit outside of Japan. While Japan is still a strong beer market from a per capita consumption standpoint, volume and dollar sales trends are mature-to-declining due to the country’s aging population and related consumption shift towards spirts, wine, and ready-to-drink canned cocktails. Similar market dynamics exist in the U.S., however the craft beer market share element makes for an even steeper uphill battle for legacy brands like Bud, Coors, and Miller. Asahi has said that it will focus on organic growth in the U.S. with its legacy brands (sushi anyone?).

Speaking of Bud, Coors, and Miller, their 2016 megamerger was all about growing in emerging markets. Further, to satisfy regulators and finance the merger, AB InBev had to jettison several marquee brands in core markets such as the EU. So, if Asahi’s international growth strategy was the proverbial hand, AB InBev’s Peroni, Grolsch, Pilsner Urquel, and others were fingers on the proverbial glove. The glove didn’t come cheap, with Asahi spending over $10 billion to buy those brands. Asahi’s latest move was the sale of its 20% in Tsingtao, further signaling its disinterest in the Chinese market, the world’s largest by sales.

So, it appears that Asahi is indeed executing on a well-defined strategy…which may or may not have been formulated in the wake of the AB InBev megamerger. Low and behold, the company’s international LTM operating profit through Q3 last year represented 37% of the total.

What Could Another Recession Mean for Public Education? A Look Back at 2008

Following a three-week government shutdown, recent sluggishness in the markets and the longest economic expansion since the Great Depression, one cannot help but wonder whether an official downturn is on the horizon. Many economists are forecasting slower growth in 2019, but the question remains, will it morph into a full-blown recession? When it comes to recessions, we see business activity slow down, profits shrink and layoffs occur. What about the effects on public education, where the entire system is financed through public funds? Let’s take a look at the impact of the most recent Great Recession.

The Great Recession marked the only period in 50 years when education spending contracted nationwide. Spending went from $610 billion to $601 billion from 2010 to 2012* and did not exceed 2009 levels again for five years. However, the U.S. economy experienced other downturns since 1970, which indicates that a recession does not always affect education spending.

K-12 employment was also negatively impacted for the first time in several decades. The number of teaching positions grew initially through the recession but then declined by 3.5% on average from 2010 to 2012**. There was a clear impact to schools and districts, albeit delayed, but to a lesser degree than the broader U.S. which saw unemployment levels exceed 10%. Interestingly, K-12 employment was also unaffected in prior recessions. Despite annual enrollment increases for the past 30 years, the student-to-teacher ratio actually declined in the two prior recessions to 2018. That said, the nearly 380,000 teacher layoffs from 2010 to 2012 reversed the cumulative improvement in the student-to-teacher ratio since 1995.

When reflecting on these two notable events, it is clear that the greatest impact on schools and students occurred from 2010 to 2012, representing a noticeable delay from the effects felt by the general economy. How did that happen? It appears a couple of variables were at play. First, federal stimulus funds provided nearly $100 billion to the Department of Education with the purpose of delivering emergency funds to states. Nearly two-thirds of that money was awarded by late 2009 which then buffered education budgets through 2010. However, expiration and roll off of these funds by 2011 and 2012, respectively, were then felt throughout the education system. This delay was also influenced by tax revenues directed toward education by state and local governments. While state tax structures vary widely, they are driven primarily by sales and income, while local budgets are supported primarily by property taxes. Given the severe decline in the housing market in 2008, one might expect that property tax revenue would have suffered immediately. Quite the contrary, many school districts were able to offset declining property values by increasing property tax rates. Local governments have utilized this tactic in prior downturns, which is why property taxes serve as a remarkably stable source of revenue. Moreover, assessed property values often lag market values, which helps to support property tax revenues, at least initially. These two combined factors upheld education funding at the local level during the worst years of the Great Recession. However, the education market was impacted in an “echo fashion” and to a lesser degree than the broader market in 2010 and 2012 as school budgets tightened due to the ongoing decline of local tax receipts and without additional federal aid.

What are the lessons learned from the past? State and local governments have weathered many downturns and have some influence over the impact to budgets. At the same time, we saw the federal government step up in 2009 and earmark stimulus funds for education. That said, it would most likely take a recession as severe as 2008 in which public, corporate, housing values, and consequently, personal incomes all decline simultaneously and to such a degree that public funding for education is negatively impacted.

** Bureau of Labor Statistics

New Findings on Physician Burnout: Key Takeaways

Last week, six authors affiliated with the Massachusetts Medical Society, Massachusetts Health and Hospital Association, Harvard T.H. Chan School of Public Health, and Harvard Global Health Institute released a headline-grabbing paper titled “A Crisis in Health Care: A Call to Action on Physician Burnout.” The authors believe that the extent of physician burnout constitutes a public health crisis and offer a handful of prescriptions for improving providers’ work experience. What does it all mean for healthcare investors, practitioners, and entrepreneurs who are looking to the future state of the U.S. healthcare system? MHT Partners, a leading healthcare services investment bank, highlights a few key takeaways:

  1. Increased screen time is crushing physician morale:  A number of high-profile providers have sounded alarms recently, including Dr. Atul Gawande in the New Yorker, about the demoralizing effect that electronic medical records (“EMRs”) are having on the day-to-day practice of medicine. Incessant documentation in unfriendly systems is resulting in less time working directly with patients, and yet more time worked overall. Solutions that extract the benefits of EMRs while easing the burden on physicians – whether the solution be technological, organizational, or operational – will surely improve the lives of practitioners, and in turn, outcomes for patients.
  2. Overwhelming administrative tasks have further infringed on face time with patients:  In addition to EMR documentation, physician burnout stems from more time spent on administrative tasks “that do little if anything to advance the goals of patient care.” Further, it appears that regulatory and administrative burdens have contributed to a shift in young doctors’ preference away from practicing independent, entrepreneurial medicine towards a so-called employed-physician arrangement. While the employed-physician model works well in many environments, rural geographies that rely on independent practitioners may become underserved over time, with clinical leadership by small-group physicians dwindling significantly. Companies working to streamline administrative practices (e.g., regulatory reporting, payor documentation) are positioned to make a significant impact on practicing physicians’ lives.
  3. Structural attention to physician mental health, physical health, and wellbeing needs to be augmented:  The paper’s authors advocate to both “support proactive mental health treatment and support” and “appoint executive-level chief wellness officers”, underscoring the reality that physicians cannot provide high-quality care to patients until they are in receipt of well-rounded, high-quality care themselves. Easing the access, acceptability, and curriculum of treatment specifically for physicians is perhaps the most rapid avenue to relieving overburdened physicians.

In addition to the paper’s findings, we note that in practice it is not only physicians who experience burnout as a result of EMR requirements, excessive administrative tasks, and a historical lack of attention on wellbeing. Nurses, physician assistants, and other practitioners experience the exact same stresses and are deserving of solutions to alleviate burnout. A shortage of healthcare professionals is anticipated in the coming decades, and any improvements that incentivize the practice of medicine as a career path will be increasingly valuable. As the paper notes, “it is not that physicians are inadequately ‘tough enough’ to undertake their work, but that the demands of their work too often diverge from, and indeed contradict, their mission to provide high-quality care.”

The Four-Day School Week: Shaving Costs with a Shorter Schedule

Did someone say, “three-day weekend?” Recent years have seen an increasing number of U.S. school districts electing to truncate the traditional five-day school week by one day in the wake of tightened budgets and decreased funding. While considered one of the more creative solutions available to alleviate cost constraints within the education system, educators are left wondering how a shorter week may impact student outcomes.

As a quick primer, the majority of four-day school weeks operate Monday through Thursday, with some districts opting for a Tuesday through Friday schedule. In most cases, school days are lengthened to 7.5 hours in order to maintain the instructional equivalency of a five-day school week, with the expectation that a shorter week will offer expense savings. According to the National Conference of State Legislators, schools operating on a four-day school week can expect to realize cost savings related to transportation, food, energy, and staff, for an average savings range from only 0.4% to 2.5% of their annual budgets. While these savings may seem small, they have proven to be substantial enough for underfunded schools that are hard pressed to cut costs. One school district in Florida reported that switching to a four-day school week produced a 0.7% savings, resulting in a budget reduction of $7.0 million. The report stated that those dollars could be used to retain up to 70 teaching positions.

Many districts have also reported other benefits of a shorter school week, which include additional time for family activities. The four-day week is particularly popular among stay-at-home parents, who enjoy spending extra time with their children or schedule appointments that might otherwise necessitate an absence from school. Many teachers have also reportedly used the additional time for preparing and planning instructional content and grading schoolwork ahead of the weekend. On a related note, many schools have also seen both student and teacher attendance improve after making the switch. However, critics of the four-day week have pointed out that the change can be tough on full-time working parents and/or lower income families, who may not be able to afford the time or costs related to fifth-day childcare. Some families have also cited concerns with students who rely on public schools for half of their meals.

As one of the primary criticisms of the four-day school week, it is important to consider the potentially undesirable impact on student learning and achievement. While any large-scale studies have yet to be conducted, some state-specific research has been published – the results are fairly mixed, and few studies are recent. One investigation performed by MIT researchers revealed that elementary students in Colorado improved their math and reading scores significantly after making the switch to a four-day school week, while a similar study performed by researchers at the University of Arkansas found no meaningful differences in academic performance. Another study in Oregon showed a temporary decline in testing scores among students on a four-day schedule. Additionally, no large-scale research exists that focuses on how longer days affect younger students’ attention spans, or how students with learning disabilities fare with a condensed schedule.

The truth is that the four-day school week was premised on the idea that a shorter week would ease the burden of underfunding rather than as a vision for the systematic upheaval of the academic system. Little is known about the effects of a four-day school week on student outcomes, although continued commitment to research and the pursuit of innovation may reveal its potential for altering the traditional educational system for the better. For now, its future has yet to be determined.

National Conference of State Legislators: “Four Day School Week Overview”
Harvard Graduate School of Education: “A Four-Day School Week?”
University of Arkansas: “The Four-Day School Week: Impact on Student Academic Performance”

Medical Device Companies | Thoughts on 2019 M&A Activity

While specialty physician practices, behavioral health businesses and healthcare IT deals have captured many recent headlines in middle market healthcare M&A, other sectors within healthcare are benefiting from strong tailwinds with less fanfare. As a leading healthcare services investment bank, MHT believes one space that is worth paying attention to is Medical Devices, where competitive dynamics, demographic shifts and new technologies are making it a compelling industry sub-sector to watch.


The medical device industry consists of instruments and machines that are used in the prevention, diagnosis or treatment of illness or disease, or for detecting, measuring, restoring, or addressing health issues. Reaching $156 billion in 2017, the U.S. medical device market represents approximately 40 percent of the global medical device market and is the largest medical device market in the world. Notably, U.S. exports of medical devices in key product categories totaled $41 billion in 2017.








Medical devices and related technologies are responsible for almost 500,000 jobs in the U.S. Importantly, for private equity firms interested in pursuing consolidation strategies, greater than 80 percent of medical device companies in the U.S. employ 50 workers or less, implying a meaningful amount of industry fragmentation at the smaller end of the U.S. medical device market, with a strong cohort of large strategic actors at the top of the market.

The competitive landscape for medical devices is driven by a broad, disparate set of sub-sector specific dynamics.  Sales of conventional products such as surgical gloves and other general surgical supplies are competitive.  These products, typically sold through specific distributors or purchased by group purchasing organizations (“GPOs”) tend to compete on price, and as such require large sale volumes to generate profit.  At the other end of the spectrum, markets for more advanced devices often involve complex pricing negotiations/agreements, are more difficult to enter and are less competitive, allowing the manufacturers and marketers of those devices to charge premium prices.

Factors Driving Interest in Medical Technologies

In 2018, the market witnessed increasing investor interest in medical technologies, with notable deals completed by strategic acquirers and private equity investors including Boston Scientifics’ November announcement that it had reached an agreement to purchase U.K.-based BTG for $4.2 billion and GTCR/Regatta Medical’s investment in Resonetics.  MHT Partners expects this dynamic to continue, as we see a number of new and related technologies come to market: connected devices generating reams of health-related data and new informatics solutions to process it; advances in robotics and biologics; and gene therapies and modification using CRISPR-related tools.  New technologies will be given lift by a common refrain: global demographic shifts.  An aging population coupled with longer life spans and a growing middle class in developing countries – especially in Asia sets the stage for continued growth in the medical device markets abroad, while the greying of the baby-boomer generation and expanded access to care drive increased demand in the U.S.

Heading into 2019, we anticipate continued private equity interest in the medical device sector, and that strategic acquirers will expand and diversify their portfolio of medical devices as they seek to supplement their R&D capabilities in an effort to provide a robust set of solutions in a particular therapy class. Notably, we think the “barbell-shaped” nature of the medical device industry lines up particularly well with lower middle market investment firms interested in rolling up their sleeves and building platforms.  As many have observed, there are relatively few well-run medical device companies of scale.  “Going small” and potentially looking abroad for medical device businesses could help investors uncover or increase value.

MHT Partners provides tailored advisory services to businesses in the middle market. If you would like to learn more about MHT’s healthcare services practice, please e-mail Taylor Curtis ( or Alex Sauter (

[1] US Department of Commerce, International Trade Administration (ITA)