The M&A sector could see a spate of pharmacy staffing companies up for sale in the not-too-distant future as small companies reach maturity and seek liquidity in a booming health care staffing market, sources say.
The lack of mergers and acquisitions activity in the pharmacy staffing area is not indicative of weak demand, but rather a fragmented market that consists mainly of small companies with revenue of USD 15m or less, according to Joel Williams, managing director of health care staffing at The Braff Group, a middle-market M&A firm focused exclusively on health care.
Despite the dearth of viable targets, several large public and private health care companies recently expressed interest in acquiring pharmacy staffing companies. So, many small companies lay in wait while growing their business to an attractive size, Williams said.
“Pharmacy staffing companies have given conscious thought to their growth plans at this point. A number of entities are targeting certain milestones in anticipation of an exit,” Williams said. The sweet spot: around USD 20m. While not that large, it’s the point in allied health where Williams said financial buyers like private equity, rather than just strategic buyers, start to take notice. “Anecdotally, as more of these companies reach USD 20m or above, the market should see a spike in transactions.”
Right now, valuations for allied staffing are roughly 4x-6x EBITDA, but could be higher for niche industry like pharmacy, according to industry sources.
No large public or private companies dominate the pharmacy staffing market, Williams said. There are a few middle-market players, but the majority is small companies. While most are still under the radar, Williams said one potential target could be Cameron & Co – a privately owned, Las Vegas-based staffing firm devoted exclusively to pharmacy, Williams said.
Ronald Cameron, CEO of the company, recently told this news service that he will be receptive to offers in February 2010, when IRS restrictions on his dismantled ESOP are lifted. Cameron confirmed that he is “well aware” of the high demand for his company’s services and said he expects a minimum of 7x EBITDA for his company, which currently has revenue of roughly USD 12m.
Potential buyers include the following health care staffing companies, which all have expressed recent interest in acquiring pharmacy staffing companies or divisions: listed On Assignment (NASDAQ:ASGN) of Calabasas, California; private CHG Healthcare Services of Salt Lake City, Utah; and private Jackson Healthcare Staffing of Alpharetta, Georgia.
CHG CEO Mike Weinholtz and Scott Anderson, CEO of health care staffing company Medical Solutions, both recently agreed that there are “no quality pharmacy staffing firms out there.” Most quality middle-market pharmacy staffing players have been acquired. AMN Healthcare Services acquired Rx Pro Health in May 2007. In June, one of the industry’s largest players, RPH on the Go, was sold to Soliant Health, the health care staffing solutions unit of MPS Group. Luis Balaguer, president of RPH, agreed that the market is fragmented and consists mainly of small companies. He could name no middle-market player.
Potential buyers who are “doing it right” include Jackson Healthcare and On Assignment, said Williams, who worked for 10 years at Supplemental Healthcare,
a USD 200m + health care staffing company specializing in nursing and allied health. He said Jackson and On Assignment are “smart players who understand (health care staffing company acquisitions) are not just a purchase. They must fit and integrate into an acquirer’s corporate culture. This is a service business.”
Many national health care staffing companies have diversified services over the past 10 years, partly because of the ever-changing medical reimbursement environment. Williams, who also was former chief financial officer of CareerStaff, said the company started out as a single-focused rehab staffing provider but starting branching out into nursing and allied health around 1999-2000 after a significant decrease in rehab reimbursement.
by Deborah Balshem
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