1. MTS Health Investors targets managed care, health insurance, health care providers, distributors of medical products and providers of outsourced services. What do you see as the most promising segments of those industries, especially in light of health care reform?
We have been spending a lot of time focused on reform, but the specific opportunities won’t emerge until the legislation is finalized. Generally, though, the winners will be businesses that can provide cost-effective, high-quality care, services or products. Cost will be a big factor, but the delivery of outcomes cost effectively will be the hallmark of winners after the reforms.
2. What has been your biggest challenge in the past year?
The frustration of watching the political process corrupt the public policy discussion on health care. The focus has been on legislation that can’t work and therefore won’t work, rather than on how the system can be improved. It doesn’t address the real problem in the system, which is that many of the people who use health care in this country don’t pay for it.
3. What are the key criteria for companies that MTS Health Investors finds attractive?
The company must be a cost-effective provider of services or products, and we must be able to offer more than just capital to the company. That might include access to new customers, partners, strategic relationships or management. We look mostly at companies in the United States with valuations between $25 million and $300 million, but we’ll sometimes invest equity capital in larger transactions with other private equity shops. As far as EBITDA, we look for companies with $3 million or more.
4. Tell me about your most recent deal and why your firm found it attractive.
We did an add-on acquisition for our pediatric home care company, Loving Care Agency Inc., that has worked out great for us. We acquired six home-care branches from Gentiva Health Services that specialize in pediatric home care. They represented more than 80 percent of Gentiva’s pediatric home care operations. That deal made Loving Care one of the largest pediatric nursing and home health aide companies in the country, with more than $145 million in annual revenues. It’s a growing business, and we were looking for an opportunity to extend our market reach by acquiring a quality, well-run provider. We liked the company’s business performance, but we also appreciated their genuine commitment to making life better for children.
5. What types of investment opportunities are you looking at currently?
We are in the final stage of due diligence on two deals right now. They are both businesses that should perform well regardless of what form health care reform ends up taking. If our due diligence suggests that we should move forward with them, both deals should close in early 2010.
Edited for clarity.