Pet Space Update During COVID-19

The pet space continues to be an attractive investment arena in the midst of the pandemic. As a leading consumer investment bank very active in the space, we field a steady drum beat of inbound interest from sophisticated investors. Notably, CD&R’s recently announced pending acquisition of Radio Systems, Corp. serves as an apt example of recent M&A activity, growth and liquidity. The rumored sale price of $1.3B represents 12.75x pro forma adjusted LTM EBITDA as of June 30 – all the more noteworthy in the billion dollar plus range.

More broadly speaking, while unlike past downturns, overall industry growth rates will decline this year. Packaged Facts estimates U.S. pet industry retail sales will decline 17% in 2020 (to $78.5B in 2020E) — the “devil is in the sub-sector details” and in the supply/demand equilibrium equation. To bookend the spectrum of pet-related products and services, pet services, which by and large have been deemed “non-essential,” have and will continue to suffer the most given shelter in place restrictions and a massive decrease in travel (as relates to pet hotels and boarding). On the other hand, pet food, befitting its staple designation, is churning along fine notwithstanding “noise” from pantry stuffing in March that has reversed itself the last few weeks. Other sub-sectors (e.g., treats, durables) fall in between.

Non-consumable pet expenditures are projected to decline in 2020, though that decline appears to be largely a supply-side function due to a subset of brick-and-mortar retailers being deemed non-essential and temporarily shuttered (though a significant percentage of smaller independents, lacking eCommerce capabilities and capital, will undoubtedly permanently disappear). Chinese tariffs have taken their toll and COVID-19 related blowback may as well. Demand, on the other hand, has held strong. As an example, dog food (an essential staple) is projected to grow 4-5% in 2020E. Distribution channels play a large role in success, and anecdotal company checks with scores of vendors with eCommerce/DTC capabilities, or wholesale customers with eCommerce capabilities, highlights strong channel outperformance in these times. Nielsen reports that online sales of pet food in the U.S. increased $281 million (51%+ growth) from February to March 2020 and year over year (“YOY”) increased 77%, compared to March 2019.

While still relatively early, premium brands have held in well, but we may see a shift to lower-priced products as consumer budgets shrink, and/or consumers, absent a truly experiential and/or unique product assortment at their favorite pet store, limit their brick and mortar visits to the “one-stop-shop” FDM venues that offer lower price point products. The pandemic has brought about a period of product and brand discovery whereby the “value proposition” (and all the elements – price, content, transparency, convenience and availability that define it) will find itself under increasing scrutiny from consumers – and vendors need to take heed.

Helping soften the blow of COVID-19 is increased pet ownership as people look to pet companionship to fill the void of social distancing. Shelters nationwide report significantly elevated levels of adoption and fostering (the ASPCA reported a 70% increase in fosters in Los Angeles and New York in March) and if the Great Recession serves as apt precedent, dog ownership rates in the U.S. (presently at ~50%) should tick up a couple percentage points incrementally and pay dividends in the future. A recent LEK Consulting consumer survey indicates that U.S. dog and cat ownership has increased approximately 4%, or approximately 7 to 8 million animals, during the pandemic.

As an investment bank deeply involved in the pet space, we remain highly enthusiastic and optimistic for the pet industry and the growth PAWSibilities in the future – we welcome a discussion with you!

Can Higher Education Remain Status Quo Once COVID-19 is Contained?

The coronavirus pandemic is accelerating change across nearly every sector of the economy from healthcare to retail. The same is true for education as colleges and universities have been forced to transition to online learning and rely on technology as the sole means for instruction. One question that students and spectators alike are asking is whether these institutions view this involuntary transition as a temporary issue or a catalyst for a new method of learning that could better benefit students in the long run.

The traditional higher education path has historically looked like this … universities annually attract new students, expand their endowments, and reinvest in their physical campuses, teaching faculties, and extracurricular programs. Teaching methods and instructional approaches have largely remained the same. All the while, tuition prices have increased exponentially, despite the bachelor’s degree offering remaining relatively the same. Offerings between institutions have also become more standardized, and differentiation more often lies in athletics and student amenities, as opposed to the curriculum or degree programs themselves. Coupled with the mounting student debt required to achieve a bachelor’s degree, the ROI of a college degree is a far cry from what it used to be. Students have never had the power or influence to mandate a change in teaching methods and the cost of college . . . until now.

There is significant need for low cost, online learning tools and curriculum. Moving instruction online can enable the flexibility of teaching and learning anywhere, anytime. Despite research showing otherwise, online learning carries a stigma of being inferior to face-to-face learning. True, taking courses online from the kitchen table with no campus environment, no new life experiences or social connections instinctively feels like a lower quality product. Yet, it should be fair to say that emergency remote teaching is not the equivalent of a well-planned, online learning course. While most universities had no trouble pivoting to online instruction, many instructors modified their course agendas to one that was reasonably achievable in a remote setting. While forced moves to remote learning regrettably could seal the perception of online learning as lower quality, when done intentionally and purposefully, the online format can create cost and scale advantages that are unachievable by traditional methods.

Though an unplanned pandemic is no fault of universities, it gives the customers a great deal of time to reflect and weigh their options. Already, many college students and prospects are reconsidering plans for next school year. As a result, the uncertainty of enrollments is sure to create financial pressure for universities, which may force them to reconsider their offerings and related tuition prices. Nearly every institution expects to see increased attrition due to students faced with financial inability to return to school, dissatisfaction with the remote learning experience during COVID, the desire to remain close to home, or a combination thereof. Students are unlikely to cough up top dollar in the long run as a result of these dynamics and the prospect of continued remote learning.

All of these influencing factors have created a breeding ground for substantive change in higher education. While ROI and scalability issues have been deliberated for years, these discussions will be accelerated due to the pressures created by the COVID pandemic. At a minimum, institutions should be cautious to focus on how quickly business can resume as usual. Instead, they should be asking themselves how they can adapt and innovate to better serve their students in the next several decades. Alterations to the higher education degree in the form of a cost-effective, high-quality experience will be required for the long-term survival of these programs.

MHT Partners, a leading education investment bank, welcomes further discussion on the effects of COVID-19 on the education industry: Rebecca Bell (; Shawn D. Terry ( or Alex Hicks (

Getting the Goods During the Pandemic: Pivoting Consumer Supply Chains

As millions of Americans are sheltering in place during the pandemic, the at-home demand for food and supplies, including paper goods such as toilet paper and paper towels, has increased, while restaurants and offices no longer need these items in bulk. According to Alix Partners, U.S. household demand of toilet paper is up 40% due to the closure of schools and offices nationwide.(1)  Coupled with consumer desires to “stockpile” some items for preparedness sake and to avoid shortages, the demand for many items in the direct-to-consumer channel has increased dramatically in the last two months. Out-of-stock shelves in brick-and-mortar grocery and sold-out e-commerce channels have forced consumers to get creative while sourcing their needed items and forced manufacturers and distributors to figure out how to pivot supply chains in order to meet these changes in demand.

Local restaurants have, in some cases, started selling grocery items to their consumer supply base, utilizing their ability to source goods at the wholesale level. Not only does this provide an opportunity for restaurants to make money and keep staff employed during the crisis, but it also potentially engenders goodwill with consumers, who may seek to patronize these establishments that helped consumers get what they needed when they couldn’t find it elsewhere (and I can personally attest to this dynamic, with a strong affection for my local Italian restaurant selling flour in bulk and my local brewery selling yeast!).

Notably, new technology upstarts are helping to enable food and toiletry businesses serving commercial markets to reach consumers directly with goods as the crisis unfolds. Cheetah, a startup founded in 2015 with an app enabling wholesale supply deliveries to restaurants, in late April just announced $36 million in funding from Eclipse Ventures, ICONIQ Capital, Hanaco Ventures, and Floodgate Fund. As the pandemic has played out, Cheetah has shifted its business model to reach consumers directly, through a service called Cheetah for Me, in which consumers can purchase groceries, paper goods, and other supplies in varying quantities via the app and pick them up at designated delivery sites around the Bay Area. As such, goods that would have traditionally found their way into the restaurant supply chain are now in the hands of consumers at home, enabling the startup to generate revenue despite widespread restaurant closures. Similarly, Choco, a Berlin-based startup that also operates in the U.S., recently raised a round of funding in mid-April ($30 million from Coatue Management, Bessemer Venture Partners, Atlantic Labs, Target Global and Greyhound). Choco, which streamlines ordering from, and communicating with, suppliers for chefs and restaurant staff, is currently partnering with its restaurant customer base to enable them to resell groceries directly to consumers.

Companies that are flexible and creative in finding ways to meet changing demand patterns in the global pandemic have clearly attracted the attention of new customers and investors and will likely continue to do so in the coming weeks and months ahead. As consumer investment bankers, we are keenly interested to continue to follow how changing supply chain dynamics will continue to shape the consumer landscape going forward. Our MHT Partners’ consumer team welcomes further discussion on changes in the consumer landscape as a result of COVID-19 (Tara Smith,, Craig Lawson,, Patrick Crocker,, Gavin Daniels,, or Tom Gotsch,


COVID-19 Presents Challenges to Equitable Learning

A few weeks ago, we wrote about the critical role of education technology in the midst of the COVID-19 pandemic. With little-to-no time to prepare, schools across the country shuttered their doors and have attempted to shift classroom teaching to remote learning, without any precedent. Digital learning programs that have long been powerful tools for supplemental instruction are proving to be increasingly important in maintaining instruction during these extended school closures. That said, districts are confronted with different challenges in implanting distance learning which begs the question: Will the responses to COVID-19 end up privileging wealthier school districts thereby widening the gap for students in districts with limited access to technology and resources?

Education has evolved tremendously from the traditional methods of teaching from a decade ago. Namely, digital learning in the classroom is much more pervasive today and is used to deliver both supplemental and basal content. In districts where one-to-one learning has already been implemented, teachers and students are already accustomed to digital devices in the classroom. Thus, the transition and use of these devices and learning applications from home is not an entirely new concept. By lifting of take-home restrictions of devices, districts with one-to-one capability have been able to put devices in the hands of every student, allowing for continuity of learning for even the youngest learners. Though students are no longer sitting in a chair in a classroom led by a teacher, they are being instructed to interact and respond to digital content in a meaningful way. This engagement is absolutely happening in an online environment, which suggests that virtual learning in some districts is occurring successfully!

On the other hand, not all school districts have access to the best resources, whether fiscal, technological, or personnel in nature. Shifting education into the online realm from home has proven much more challenging for districts with partial availability of devices and internet connections at home. The timeline for instructional continuity for districts with fewer resources has proven to be longer. For districts serving a portion of the 30 million students who qualify for free or reduced lunch programs, remote learning has taken a back seat, at least initially. These districts spent the first weeks of closures prioritizing and streamlining distribution of food and meals to students. Upon ensuring students were being fed, these districts then turned attention to solving the problem of implementing learning from home. Yet, uphill challenges emerged in this area as well, forcing districts to get creative in bringing the classroom to the home. Approximately 5 million students lack internet access at home, due to low income or rural living situations. Education officials in South Carolina have resolved such issues by utilizing idle school buses, equipping them with wifi and parking them in specific neighborhoods to bring connectivity to these homes. However, connectivity is only useful if students have a device to go with it. In districts with fewer devices than enrollment, typically older students received priority in obtaining a loaner device. This leaves many households sharing a single device among siblings, which creates time constraints for each learner. As a last resort, a number of districts have gone “back to the basics” and send home paper packets and activities that do not require internet. That said, this approach is not particularly interactive, nor does it represent the gold standard of learning. Finally, there are teachers who are suddenly required to reimagine instruction and assignments in a digital and remote setting. Numerous challenges are presented including the varying levels of technological expertise by the individual teachers, as well as parents and students themselves. As each district does its very best to overcome the challenges presented by COVID-19, it’s apparent that there is no “one-size-fits-all” solution.

While it is too soon to determine whether COVID-19 will result in wider learning gaps for U.S. students, on the surface, we see that different districts have dealt with different priorities depending on their student demographic. No doubt, on the surface it appears that students with greater internet connectivity, familiarity with technology for learning purposes, and in-home availability of books and materials will have much higher probability of benefiting from remote learning during social distancing. These advantages are further pronounced by the fact that schools that have implemented digital learning in the classroom for many years prior to the pandemic have teachers that are inherently more prepared to teach remotely. One thing can be certain, the longer schools remained closed, the more likely equity in K-12 learning will deteriorate.

MHT Partners, a leading education investment bank, welcomes further discussion on the effects of COVID-19 on the education industry: Rebecca Bell (; Shawn D. Terry ( or Alex Hicks (

Made in the U.S.A: Will (Should) Global Supply Chains Survive the Pandemic?

The Federal Reserve’s Industrial Production and Capacity Utilization report for March, which was published on April 15, shows decreases in manufacturing output and industrial production of 6.3% and 5.4%, respectively(1). Declines that steep haven’t been felt on U.S. soil since 1946, when the country was demobilized in the wake of World War II. Manufacturing eventually rebounded significantly in the post-war era, as pro-labor legislation and limited global competition revitalized the automobile industry and paved the way for emerging sectors such as aviation and electronics. If past activity is any indication of future behavior, then the U.S. will innovate during this contraction to minimize the trough and then accelerate into recovery, but given the unprecedented nature of this crisis, can history repeat itself?

Over the past three decades, supply chains have become increasingly global – the passage of policies favoring free trade coupled with advances in logistics technology have resulted in a ‘shrunken world’: low-wage countries in regions that were once considered ‘distanced’ are now highly accessible. Further, in a capitalistic economic system where the health of a business is determined by its profitability, keeping costs low is key – in addition to labor, both land and raw materials can be significantly cheaper internationally. A single player that increases margins by outsourcing production is enough for the model to emerge as the benchmark for the industry – those that don’t adapt will be squeezed from the market and we (consumers) become reliant on goods delivered through complex supply chains.

A ‘black swan’ event, like COVID-19, is typically viewed as once-in-a-century occurrence, but the sheer magnitude of disruption caused by the pandemic should be the catalyst for a revamp of supply chains. The evolved sourcing methods that have generated a positive feedback loop between profit-maximizing producers and thrifty consumers have now been unmasked, and what we see isn’t pretty – intricate chains are inherently fragile when dependent on multiple tiers (“links”) of suppliers, alarming concentration driven by the bottom-line mentality that prioritizes price above diversity, and severe inventory shortages that were once touted as a cost advantage resulting from lean operations. Those three realities, which were previously considered to be minimal threats, have increased risk exposure to a degree that’s unquantifiable.

Remedies for these issues will unquestionably take both time and resources to implement, but the framework can be engineered now with a basis centered on shortened supply chains by way of a shift to onshore manufacturing. An upheaval of existing processes will surely come at a cost for any business, but potential losses can be mitigated. Recent advances made in automation, namely artificial intelligence (“AI”) and machine learning, have given birth to promising processes like 3D printing and other robotic-based production that offer optimization while minimizing the need for human capital, which has dissipated (for good reason) amid the social-distancing orders required to navigate a pandemic. By bolstering existing policy that encourages businesses to invest in these cutting-edge solutions, Uncle Sam can help facilitate the technological transformation, which will actually reduce costs long term through economies of scale.

While not domestic but technically onshore, Mexico represents another alternative for reconfiguring lengthy, multiple-link logistic chains – the country saw low-cost labor hover around $5 per day in 2019(2), while China’s minimum daily wage ballooned to almost $17 by the end of the year(3). Establishing supply bases in the western hemisphere would help shorten and diversify chains to reduce the risk carried in global networks that are prone to collapsing at any node.

Undoubtedly there are limitations to the changes proposed above – for example, complete vertical integration is not feasible for a U.S. manufacturer of bicycles that needs scandium, an element that’s only known to exist in Scandinavia and Madagascar, for frames. So, while it may not be possible to source all raw material in North America, larger inventories could be stored on the continent as an emergency supply. The storage of materials that are required for the production of essential goods is crucial in ensuring that a country has a sufficient supply of healthcare equipment for citizens amid inevitable future pandemics.

U.S. companies would be wise to learn from this ongoing tragedy by embracing advances in production technology and diversifying supply networks to strengthen themselves in preparation for the next event, whether it is another pandemic, a war, cataclysmic climate change, a large-scale cyber attack, or a natural or man-made disaster.

(1) United States Federal Reserve System
(2) Thomson Reuters
(3) Trading Economics
The Wall Street Journal

Food & Beverage Opportunities in the Midst of COVID-19

COVID-19 has certainly created challenges and pain in a host of industries.  That said, adversity often breeds opportunity, and it is no different for the consumer packaged goods (“CPG”) industry. With respect to the food & beverage side of things, below are a few observations:

  • With respect to food & beverage, the direct-to-consumer (“DTC”) model, while benefiting in an outsized manner presently due to “pantry stuffing,” will nonetheless capture gains due to permanent shifts in consumer behavior, increasing their share of consumers’ buying trends and wallets.
  • U.S. consumers spend approximately 10% of their disposable personal incomes on food; split roughly 50/50 between at home and away from home, with the scales tipping slightly towards eating out. From a dollar perspective, U.S. consumers spent approximately $1.6 trillion on food & beverage in 2019. As of this moment, most of that approximate $900 billion of “eating out” spend is “up for bid.”
  • Given the dislocation in the market, an opportunity for a brand discovery presently exists as consumers rethink family food budgets, what they are eating, and the nutritional choices they are making. In particular, DTC models, already on the rise, have an opportunity to further accelerate their traction. Food & beverage eCommerce sales, while a small ~2% of total food & beverage sales, were already growing approximately 20% annually prior to COVID-19.  While only one data point, Unilever reported DTC sales of its products (approximately 6.5% of its total sales) grew 36% in the quarter. Shelf-stable products (particularly those in non-glass lightweight packaging) stand to benefit most, as they are conducive to efficient, cost-effective pick-and-pack shipping.
  • One would expect to see eCommerce penetration increase across all cohorts (Gen Z, Millennials, Gen X and Baby Boomers) but in particular, on a relative basis with Boomers, and to a lesser extent Gen Xers, given the unique COVID-19 age risks at hand.
  • Male purchases, which lag female purchases, may see an upsurge related to an apparent higher COVID-19 infection risk within males.
  • Premium food & beverage products have held up decently thus far and are likely to continue to do so, though the longer a return to “normalcy” takes, the more “in focus” these products will be in the cost-benefit analysis of consumers. Continuous adherence to a rational and attractive price value proposition will be key for these companies as they reflect upon their distribution channels, price points and content.

To date, we have seen numerous examples of consumers investing in themselves during this period of social distancing . . . exercise equipment, outdoor products that can be used in a solitary context, supplements, and food (for themselves or their pets) – and let’s not forget alcohol (for mental well-being!).

MHT Partners, a leading consumer investment bank, is very active in the food & beverage space and will keep its finger on the pulse during this global pandemic. If you would like to learn more about MHT’s consumer advisory practice, please e-mail Craig Lawson,; Patrick Crocker,; Gavin Daniels,; Tara Smith, or Tom Gotsch,

COVID-19 & IT Services: Cyber Security & Cloud Expertise are Paramount

The COVID-19 pandemic is causing a huge spike in the number of at-home workers. Estimates show that two thirds of the U.S. workforce now work remotely, and this number is expected to remain steady through April and potentially May.(1) In turn, this has put extreme pressure on internet bandwidth. During the month of March, global internet traffic increased by 30% while normalized monthly growth was expected to be about 3%.(2) Yet companies are being forced to slash IT spending because of the growing economic uncertainties as a result of the pandemic. The combination of a larger remote workforce, increased internet traffic, and shrinking IT budgets has presented cyber criminals with an ideal environment for wreaking havoc.

Cyber attacks have exponentially increased since the onset of the pandemic, largely due to the transition to a distributed workforce. As employees bring corporate devices onto unsecured networks and unsecured devices onto corporate networks, they provide cyber criminals with a variety of potential entry points into a company’s network infrastructure, such as remote desktop protocols (“RDPs”). A recent analysis by Reposify indicates an increase of 127% in exposed RDPs since the start of the pandemic.(3) Targeted attacks have appeared in many forms. As of March 26, the number of coronavirus–related phishing attacks rose 667% compared to the prior month.(4) Cyber criminals attempt to gain access to employee credentials or other sensitive information through clickbait that tempts the employee to follow a link for more information. Another commonly used method for cyber-attacks has been the creation of fake COVID-19 informational websites. Over 100,000 domains have been created since the start of the crisis, many of which are aimed at preying on people who desire real-time updates on the pandemic.(5)

Despite a short-term IT spending spree required to enable working remotely and defend against cyber attacks, companies are expected to pull back on overall IT spending as a cost-cutting measure to combat the economic slowdown resulting from the pandemic. Forrester has revised its forecast of 2020 IT spending to be down nearly 10% between March and April alone.(6) While providers of IT products will be hit hardest, IT managed service providers (“MSPs”) that are particularly well equipped to enable remote workforces and provide cyber-security solutions are expected to fare better than other industry participants during the downturn. The necessity of increased investments and the need for third-party assistance to build and secure remote work capabilities were quickly realized once the nation was ordered to work from home. In a recent survey of channel companies conducted by CompTIA, approximately 75% of the firms reported an increase in business opportunities since the onset of the pandemic, primarily due to the shift from on-premise infrastructure to cloud-based infrastructure and the need for enhanced cyber-security solutions.(7)

Moving forward, although overall IT spending will be down for a period of time, MHT Partners expects pure-play MSPs and IT services companies with significant revenue derived from cloud and security expertise will continue to be sought-after acquisition targets, as these firms will fare better in the downturn and be in the best position for accelerated growth as the economy recovers.

MHT Partners, a leading technology investment bank, welcomes the opportunity to discuss how the IT services market will continue to evolve in a post-pandemic world. Please contact Kevin Jolley ( or Mike McGill ( to start a conversation.


Play to Connect: Gaming is Engendering Social Connection in the Age of ‘Shelter in Place’

By all accounts, the U.S. gaming industry is booming due to shelter-in-place ordinances systematized throughout the country. From video game consoles, like Microsoft’s Xbox or Sony’s PlayStation, to mobile apps and board games, consumers are turning to gaming not only to escape the onslaught of COVID-19 headlines, but also to connect with friends and family safely and responsibly.

Video game consoles have reported large spikes in usage. Sony recently reported throttling game download speeds for its PlayStation platform in order to “ensure internet stability.” Microsoft’s Head of Xbox, Phil Spencer, commented on Twitter that “usage is up on almost everything,” referring to the many online titles offered on the platform. Steam, an independent digital distribution service that allows consumers to purchase games directly from developers, reported the highest average concurrent users ever on the platform last month, an increase of 20% over the same period last year. The popularity of traditional console games combined with the desire for players to interact has put a strain on supplemental communication services, like Xbox Live and Nintendo Online. These services, which allow gamers to chat, joke, and coordinate strategies live while engaged in multiplayer games, have reported multiple short-term outages over the past month due to the burden of increasing demand. While the ability for gamers to ‘meet up’ online is not new, the widespread shelter-in-place mandates make these services a unique draw for many who are looking to connect with peers. As such, the world of online gaming is seeing many new faces, as well as some familiar faces, more often.

On the mobile app front, the usage of gaming apps on phones and tablets is up 75% according to March 2020 data published by Verizon, with 23% of those users playing newly downloaded games(1). The increase in usage is double that of social media, web, or video streaming apps like Netflix, Amazon, and Hulu, over the same period. According to the data, card, word, and board game categories saw the largest increase among new game downloads, respectively. The increase in card and board game app downloads may correspond with a similar uptick in the use of virtual services, such as Zoom, Skype, or FaceTime, where friends and family can converse in real-time while also playing the same virtual board game. Or, as I can attest, weekly poker nights using Zoom to add some jokes and banter to our app-based group poker game.

Demand for traditional board games has also increased. Ravensburger CEO, Filip Francke, reported last week that puzzle and board game revenue is up 10x over March 2019 – numbers typically seen only at the height of the holiday shopping season(2). One reason for this may be as families and parents seek wholesome entertainment for their kids, board games have become a great, non-screen-based option. Another indicator of the popularity of board games can be found at Hasbro, whose stock has strongly outperformed the broader S&P 500 over the past month due to increased demand for the Company’s traditional board games such as Monopoly, Operation, Jenga, Life, and Risk. Capitalizing on their products’ increasing popularity, last week Hasbro launched the ‘Bring Home the Fun’ program, offering parents and caregivers resources to keep kids engaged and challenged and offering tips to ensure families stay connected during these difficult times.

Natural disasters and economic crises tend to accelerate underlying trends, business models, and business practices that were sustained by a strong economy. Gaming has been growing its share of consumer time and entertainment spend for years. As we find ourselves in the throes of maintaining social interaction during the age of COVID-19, gaming has developed from being a convenient form of escapism, to a useful tool for nurturing our social relationships. As we look ahead towards eventually exiting this crisis, it will be interesting to see if the accelerating trends in gaming and social connection maintain their trajectory going forward.

As consumer investment bankers, we are keenly following the evolution of online and in-person gaming in the age of COVID-19. For further discussion around the trajectory of consumer M&A and the current market environment, please feel free to reach out (Craig Lawson,, Patrick Crocker,, Gavin Daniels,, Tara Smith,, or Tom Gotsch,


Emergency Medical Services During COVID-19: Observations and Opportunities

In recent weeks, emergency medical services (“EMS”) and ground medical transportation operators have been on the front lines in the battle against COVID-19. Predictably, given the massive disruption that the virus has imposed on the healthcare system, the medical transportation industry has been upended. Understanding the challenges that medical transport companies are experiencing, planning how to navigate and emerge successfully, and looking ahead to areas of opportunity within the industry will position leading companies to succeed going forward.

In recent days, MHT Partners has had conversations with a number of EMS companies and investors in our network, representing large multistate ambulance companies, regional and local operators, vendors, and private equity groups. In all of our discussions, a handful of key observations have emerged as we look to weather COVID-19 and assess its impact on the industry:

  1. First, the COVID-19 pandemic has significantly impacted medical transportation companies’ performance. Ambulance operators in every jurisdiction have noted that volumes for all classes of service are down approximately 25%. For emergency transports, fewer road miles, widespread workplace closures, and lower hospital utilization rates for non-COVID-19 conditions are depressing volumes. Individuals are largely avoiding hospital environments if they can help it, viewing them as potential COVID-19 hotbeds. Inter-facility and non-emergency transports are down as well, due to isolation protocols within many skilled nursing and assisted living facilities as well as widespread postponements or cancellations of elective procedures.
  2. From a labor supply perspective, paramedics and EMTs on the front lines have been exposed to COVID-19 at greater rates than the general population. And in areas such as New York, the ranks of first responders have been thinned due to confirmed cases or self-imposed quarantines. Even in less-populated areas with lower infection rates, where medics and EMTs may perform work for multiple municipalities or private agencies, efforts to limit the mixing of employee pools have made staffing more difficult.
  3. On the bright side, government and commercial payors have continued to function as usual, maintaining their reimbursement commitments to ambulance operators.
  4. EMS agencies have also performed better on a relative basis than many other segments of the economy, as they have been deemed essential services.
  5. Lastly, ambulance companies have access to emergency funds provided by the federal government just like other businesses.

For these reasons, all signs point to medical transportation companies emerging from the coronavirus pandemic in a position of strength.

In fact, many industry participants are tracking ways in which COVID-19 may accelerate the adoption of emerging operating models and technology within medical transportation. Most notably, though The U.S. Department of Health and Human Services (“HHS”) has delayed the pilot of its Emergency Triage, Treat, and Transport Model (“ET3”), The Centers for Medicare & Medicaid Services (“CMS”) has temporarily allowed the flexibility to transport Medicare beneficiaries to alternative locations for the duration of the COVID-19 emergency. Operators are also watching for relaxed treatment-in-place (so-called “treat-and-release”) and telehealth protocols. Investors with a close eye on emerging trends within EMS include Frist Cressey Ventures, which last week announced a partnership with Ready Responders, a technology-enabled provider of in-home urgent care working with EMTs and paramedics.

MHT Partners, a leading healthcare services investment bank, is very active in the medical transportation industry and will keep its finger on the pulse during this global pandemic. If you would like to learn more about MHT’s healthcare services advisory practice, please e-mail Alex Sauter ( or Taylor Curtis (

What Will “Back to Normal” Look Like for Physicians Once COVID-19 is Contained?

As COVID-19 continues to spread across the United States, the nation’s healthcare professionals work tirelessly to treat patients, reduce the spread, and keep the healthcare system running. With social distancing in effect and more physicians working directly to slow and treat COVID-19, most routine physician appointments have been delayed or cancelled. It’s hard to say when physicians will return to normal schedules and corresponding patient volumes, however, it is clear there is significant pent-up demand for non-emergency doctor visits.  This blog examines how several sub-specialties in healthcare could rebound as social distancing efforts are lifted.

U.S.-based orthopedic surgeons perform 1.77 million knee arthroscopies, 200,000 rotator cuff repairs, and 100,000 ACL reconstructions each year1. ENTs successfully complete 500,000 tonsillectomies and 250,000 sinus surgeries annually2. These surgical interventions represent only a fraction of procedures that are vitally important to the well-being of millions of patients but have also been delayed to ensure hospitals retain capacity and to reduce the spread of COVID-19 to patients. With likely 10-15% of annual procedures now delayed or cancelled, physicians across the diverse array of surgical specialties, nurses and techs in those fields, and operating rooms will be in high demand when COVID-19 cases begin to decrease.

Regular check-ups and screenings have also been put on hold for several weeks and potentially longer. Many primary care groups and even select specialist groups, in areas like dermatology, are rolling out telehealth support for patients, allowing for continued appointments, chronic disease management, and prescriptions for acute, non-COVID-related conditions. However, without regular, in-person primary care, some health problems may go undetected in some already at-risk patient populations. For example, type-2 diabetes and high blood pressure are common health issues caught by primary care physicians in a physical setting3 that may be underdiagnosed in the coming weeks. Specialists that rely on referrals will also see lower appointment traffic. Moreover, many regularly scheduled screenings have been deferred or cancelled. For example, there are 17.3 million mammograms3 and 19 million colonoscopies3 in the U.S. annually to screen for breast and colorectal cancers, respectively, most of which will not happen in the coming weeks. Without screenings and routine check-ups, it is reasonable to expect lower numbers of diagnoses of common diseases, including cancers, in the coming weeks. But, when healthcare operations return to closer-to-normal numbers, diagnoses will likely catch-up quickly to track with expected annual totals, followed closely by those patients beginning appropriate treatments.

Meeting the growing backlog of healthcare demand comes with several challenges:

  1. First and foremost, keeping healthcare providers safe and healthy during the treatment of COVID-19 is necessary for meeting any demand for future healthcare. Appropriate personal protective equipment and precautions for providers will help fight this pandemic and preserve their ability to fight future health challenges.
  2. Additionally, with appointments for screenings, check-ups, and procedures plunging in recent weeks, many private physician practices have turned to furloughing or even laying off personnel that are not involved in activities essential to tackling COVID-19. Physician groups will need to ramp their head counts back up to schedule and treat patients once the epidemic passes.
  3. Lastly, appointments will not strongly rebound without health insurance certainty, which is threatened by the recent mass layoffs.

COVID-19 has challenged the healthcare system in an unprecedented manner and will continue to do so as we approach the peak. Once beyond the momentous task at hand, though, physicians, healthcare systems, and stakeholders will need to begin thinking about how to address a large demand for more traditional healthcare services for patients who will be anxious to see their physician again for surgical procedures, screening exams, and even their routine annual visit.

MHT Partners, a leading healthcare services investment bank, welcomes further discussion about the effects of COVID-19 on the healthcare industry: Taylor Curtis ( or Alex Sauter (

(1) U.S. Market Report Suite for Orthopedic Soft Tissue Repair and Sports Medicine
(2) American Academy of Otolaryngology-Head and Neck Surgery
(3) Center for Disease Control