← Becker Business
Becker Business
Inside the Healthcare Deal Market with Craig Sager of Provident Healthcare Partners 10-18-25
00:12:24
In this episode, Craig Sager, Managing Director at Provident Healthcare Partners shares insights into current trends shaping healthcare M&A, the rise of behavioral health and tech-enabled services, and how founder-led organizations are navigating today...
Loading summary
Transcript16 lines
- [00:00]
A
This is Scott Becker with a special episode, a combined episode of the Becker's Healthcare and the Becker Private Equity and Business Podcast. We're joined today by a brilliant investment banker from Provident Health Partners, Craig Sager. And Craig's going to talk to us about the deal market, what it means to be a healthcare investment banker. He's had a fascinating background. He spent some time at Optum and some other companies and then at some point he rebounded back to Provident Health Partners. Craig, so, so, so delighted to talk to you today. Can you take a moment and tell the audience both a little bit about yourself and then what you do as a healthcare investment banker?
- [00:42]
B
Sure, Scott, thanks for having me on today. Yeah. So I've been doing this line of work for the last 15 years and I would say this line of work equates to Healthcare M and a transaction work, strategy, growth. Half have been here at Provident on the investment banking side and then the other half on the buy side. So corporate development roles, as you mentioned, Optum was one of them. And then most recently at a private equity firm. We were a healthcare technology and service investor. So have had the ability uniquely to see kind of both sides of the table on how intermediaries and sellers think. That's what I do now, that's what I love to do. And then certainly how buyers and boards and LPs and invest committees like to think over. Here at Provident we are one of the first healthcare specialized investment banks. We started in the 19, late 1990s. So we're on year 27. You know, it's, it's more and more competitive these days. There's a lot more healthcare investment banks, but we've been doing this since day one one. Our job as a firm, my job as an MD here at Provident is to really be the river guide for organizations going through a transaction process. A transaction can mean selling 100% of your business and you're completely sun setting. A transaction can mean you're selling 75% of the business, you're locking hands with a private equity firm or another type of buyer and you're going to stay on and run the show with your team for the next three to five years. It can also mean you're going to go raise 30 million bucks and only sell 10% of your business. And you have investors in the boardroom and on the cap table. But really you still have complete control of operations and decision making. We do all of those. We also do debt raises and some other sort of strategic advisory work. But Again, an important part of what we do at Provident and firms like Provident is we're an intermediary or important part of the ecosystem that really helps connect dots, connect. Really interesting thriving organizations in healthcare that are doing really important work to institutional capital out there. And obviously as we all know there's a lot of dry powder. So I'll stop there as an introduction.
- [03:02]
A
Yes, no. And so to take us to healthcare specific, what types of organizations do you typically work with? Give us a sense of types of engagements, types, companies or who you're typically working with.
- [03:18]
B
Sure. 75% of our clients are founder owned healthcare organizations. The other 25% private equity portfolio companies that have again institutional capital in them. On the former, we work across all of healthcare with the exception of life sciences and call it drug development. So a ton in healthcare services. We're doing more and more in healthcare technology. We do everything in provider services. We have a big book of business and post acute space eyelid our behavioral health efforts. We do a lot in staffing, DME payer services. So really we have a lot of different sort of pockets of Expertise. We've got 30 bankers across three offices. So we have certain folks that sort of specialize if you will. So that's, that's generally where we play from a sector standpoint and from these founder owned businesses it can be anywhere from one owner, one shareholder who's been running the business for 30 years and it can be up to we did a deal handful of years ago that 130 doctor shareholders. Right. And then everything in between.
- [04:29]
A
So and talk about, talk about for a second, which areas are more active right now, what's less active? You talk about a whole variety of healthcare services areas. We see some areas that are busy, some are not. What are you seeing? What's busy, what's not busy, where's their interest From a buyer perspective particularly I.
- [04:56]
B
Would say broadly speaking from a, call it size of company. In healthcare, the lower middle market, which is general we play, is the most active. So you're, you're seeing less 500 million dollar billion dollar plus transactions given some macro dynamics, kind of what's going on in the debt world, although it's, it's seemingly getting better, some, some political climate factors. But in the lower middle market, which can translate anywhere from call it deals going from $20 million of enterprise value up to 500, it's relatively active from a sector or vertical standpoint. You know we made a really good living years ago doing PPM provider practice management organizations which are generally doctor Run businesses. We still do a lot there. There's definitely been, I would say a little bit of a less activity there within the last couple of years. Just it's been hyper consolidated. There's staffing shortages. You know those businesses can be less attractive these days. So we're doing more and more in behavioral health along with I think just a lot of other banks and other investors. Anything that sort of has any type of value based care spin to it is always going to attract investors. And then, and then certainly this has always been the case, but I think we're starting to see more and more maturity in health care technology or tech enabled businesses that are really bringing differentiation to.
- [06:26]
A
And what types of healthcare tech tech enabled businesses are you talking about? Where do you see activity there? Is it, where, where do you see the activity? Is it digital health, is it revenue cycle tech or is it, what kind of areas are you seeing a lot of activity in the health tech area?
- [06:44]
B
There's Scott, I mean there's, it's really across the board. There's, there's obviously thousands of different companies that are trying to solve various problems. Some are comprehensive in nature where it's like working with companies that build an end to end model. They have an EMR practice manager system, they have different analytical tools, really front end, back end. They do all the rcm, all the billing, all in house. But then we've got people that are building very, very Nichy specific tools to solve one thing like value based care analytics or certain RCM functions or a lot of different AI tools that are coming out to sort of help with staffing shortages or to kind of bend the retention hit that's going on out there.
- [07:28]
A
Craig, let me ask you a follow up question. There are so many different solutions out there and so many people trying to hit the market. How many of the companies are sort of more or less point solutions that have gotten really good at something that are now trying to grow and merge into a larger company. That's not so much for point solution. How much of that do you see and how much are things really platforms versus point solutions out there that you see?
- [07:53]
B
I would say the high majority of businesses that we look at that are out there are more point solutions. And listen, a lot of them have a hard time getting to cash flow positive and really kind of getting a transaction done. But building a true end to end solution takes a lot of sophistication, a lot of developers, a really important vision from the leadership team. So more times than not they're more nichy point Solutions. And then a lot, you know, we, we're doing more and more in sort of minority growth capital transactions. A lot of the tech deals, it's more of that versus on the services end where you'll sell. You'll sell.
- [08:33]
A
No, no, absolutely. And talk a little bit about that sort of the, the sort of balance of venture growth versus private equity as buyers. And what does that look like? And then I'm going to ask you about valuations and what you're seeing on valuations and multiples and how things are looking there. But talk about how much you see sort of growth capital, venture capital invested in these efforts versus traditional private equity where it's more on the services side and cash flowing and EBITDA and all those types of things. What are you seeing out there? And sort of the distinctive types of investors.
- [09:05]
B
Yeah. At this point there's, you know, probably over a thousand capital groups out there that have a healthcare focus or a portion of their fund is healthcare focused. It can be made up at the sort of the top of the spectrum private equity. They're looking to control deals all the way down to venture capital where they're just trying to get a little piece of the pie. And then you've got growth equity people that sort of sit in between. I would say generally speaking on service deals. So companies that have no proprietary technology, they are providing care delivery, whether it's provider services or post acute, whatever it might be to an end market or a population. Those businesses, you know, it's not that there's, there's nothing against them, but generally their investors want control of those businesses. Right. Giving someone 10 million bucks but not having able to scale or accelerate like the pace or clip of a, of a technology company, generally you see less minority deals happen there. Vice versa in a technology company where you know, it's really more Generally a more B2B play, although obviously some could do B2C as well. You see a lot more minority deals given all of the venture funds out there that need to put capital to work. And the, the chances of a technology company failing is generally much higher. Right. So they're making a lot of bets across a lot of different companies to see which one can take off. And so generally there's a, there's a bigger appetite for minority deals when it comes to more tech or tech enabled.
- [10:41]
A
Fascinating. And, and take a moment just on. We just got a couple minutes left and Craig, where are you most focused and excited this year? What are you most excited about currently?
- [10:52]
B
I'm probably biased Scott But I, I'm spending a ton of my time in, in behavioral health and it's, it's such a fascinating industry. Obviously, you know, it's, it's been around for decades and, but compared to other sectors that we've historically worked on, it's still in the early innings. When you think about investment, when you think about payer evolvement and you have all these really cool companies that are coming out, founder, own, private equity backed that are solving really important problems across mental health, idd, autism, eating disorder, so on, so forth. And there's no, no company is the same. Every company we look at or evaluate, helping them kind of get through their growth initiatives. It's always, people have a different sort of game plan, a different approach and it makes it really interesting and sort of every day we kind of wake up and it's, you learn something and you're starting to see more and more capital deployed into it. And you know, we're still years away for it having as much consolidation as we see some other sectors. But it's again, probably biased, but there's a lot of cool stuff going on in vehicle health.
- [12:00]
A
Thank you very, very much, Craig. What a pleasure visiting with you. What an incredible business. I've been watching Problem Health Bartons for a long time. What an incredible business you guys have built. It's one of the early, early players in the area and just fantastic. Thank you for joining us today on the Becker Healthcare in the Beckham Private equity podcast. Thank you very much.
- [12:19]
B
Thanks, Scott.