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August 1, 2019

Private Equity Investment in ENT Practices

MHT Partners  | Healthcare Investment Bank

Private Equity’s love affair with specialty physician practices continues, as sponsors with an interest in healthcare investments seek opportunities to partner with leading otolaryngology practices.

Attractive Specialty – Large, Dynamic Market

Otolaryngology, or “ENT” is a medical specialty which is focused on the ears, nose, and throat. It is also called otolaryngology-head and neck surgery because specialists are trained in both medicine and surgery.

The otolaryngology industry is dynamic and expansive, covering a broad range of medical, surgical, and cosmetic procedures, such as tonsillectomy, head and neck cancer treatments, and rhinoplasties.  Many of the procedures treated by otolaryngologists, such as asthma and seasonal allergies, hearing loss and tinnitus, and sleep apnea and snoring, affect multitudes of the U.S. population, resulting in a large, diverse potential patient base.  Due to the wide range of procedures performed by ear, nose, and throat specialists, most practices report that no single class of procedures account for more than 10% of revenues.  Industry growth is forecasted to be steady over the coming years; key catalysts of industry expansion include an increasing population of citizens age 65 and older (one in four Americans over age 65 suffer disabling hearing loss; the rate doubles to one in two by age 75), and expanding discretionary income, enabling more Americans to choose elective procedures.

A Proven Playbook

As sponsors pursue ENT practice acquisitions, they seek to execute a game plan for value creation honed through investment in other specialties such as Dental, Dermatology, and Ophthalmology – specifically the “roll-up” strategy.  As part of this strategy, a platform investment is made in a larger practice, and then several other smaller practices are acquired over time, growing the footprint of the group, expanding its geographic reach, and diversifying its collections’ base, patient base and service offerings.  Roll-up strategies are most successful in fragmented markets with numerous partnership opportunities.  In this regard, ENT presents a fertile landscape.  Indeed, it is early stage for ENT.  Only a handful of sponsor deals have been consummated, including Audax’s notable partnership with South Florida ENT Associates, and Shore Capital’s formation of Southern Ear, Nose, Throat and Allergy Partners.  Another compelling reason for investing in ENT practices is the frequent pairing (whether owned by the physicians or through other partnerships) with ambulatory service centers (or “ASCs”).  ASCs provided another attractive stream of revenues to the ENT group, allowing the group to capture facility fees, in addition to the associated patient fees. Please reference MHT Partners’ blog on ASCs to learn more.

We’re Here to Help

Partnering with specialty physician practices as they evaluate strategic alternatives for their businesses represents a significant portion of our work in the healthcare space. As a healthcare investment bank, MHT is active in the market, recently completing anesthesiology, dermatology, and emergency physician deals.  We would love to be a resource for you as you consider the rapidly evolving healthcare landscape and the implications for your practice.  If you would like to learn more about MHT’s healthcare services practice, please e-mail Patrick Krause (pkrause@mhtpartners.com), or Alex Sauter (asauter@mhtpartners.com).

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