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steve sapleto national deal advisory strategy leader for healthcare and life sciences here at kpmg steve the floor is yours perfect well thank you for that uh long-winded intro uh on how to get cpes but uh uh welcome everybody and uh very excited to be here today and and kind of going through our investment outlook and where we're at in 2022 uh joining joining me as part of the the panel today is kristin pathier our global national strategy leader for healthcare life sciences deal advisory we have jeff stoll who is our national leader for life sciences partner as well ross nelson partner in our healthcare national leader and then breck lover a partner in our healthcare life sciences financial due diligence practice so great group of individuals today to walk through the panel so thank you for thank you panel members for jumping in the agenda today is is going to hit a couple of things one i'm going to start with a couple of high-level investment trends that came out of our survey in our paper that we did also we're going to talk specifically about some 2022 trends across both healthcare and life sciences sub sectors we're also going to highlight hit a couple of points around items that are it could potentially impact the m a in 2022 things that are happening around interest rate hikes inflation and other topics and and what that means to you within your particular sub sector and then finish with a little bit of a wrap up and and where are we going forward in the path forward so that's our agenda today and looking forward to to the discussion first first thing on a couple of the investment trends that we've seen 2021 was it was a great year for m a i think we all felt the the the passion as well as the the limited resources and executing when i look at the kind of the healthcare or the life sciences side specifically we had over 460 average on a quarterly basis transactions which was an increase significantly over the 405 in 2020. on the healthcare side we saw a continued increase in what the home care hospice personal care transactions as well as an increase on on the um on overall hospitals and the size size of those transactions the one thing i'd say we're two months into 2022. we've seen a couple of trends already uh beginning with the beginning of the year was a little bit slower but we also knew that because of the number of transactions that we're trying to get finished at the end of 2021 and we were just short on resources to kind of execute on those deals but also we did see some smaller and mid-sized transactions at the beginning of this the first couple months but we fully expect that going forward in the middle in the back half of the year to see some larger transactions that might even fall into the category of transact to transform so we're really excited about you know fiscal year 2022 and the excitement around m a so having said that i think we have our first polling question uh so this is the fun part of the cpe process so what sub sector do you represent you will see this slide here for maybe about another 30 seconds to give you a chance to to answer the question and then we'll keep moving forward so i think we'll we'll move to the next thank you so kristen do you want to jump in yeah that sounds great and so while you're all answering those poll questions let's dive into the data so what you're going to be seeing today and the observations that we have are based on our deals and strategy work around the world and a market survey of over 300 healthcare and life sciences executives and we really cover a number of the different sub sectors across healthcare and life sciences so within life sciences we really span the continuum of everything from biopharma to diagnostics to lab services to biopharma services to medical device and then in healthcare similarly we look through of course across in healthcare i.t the hospitals and health systems behavioral health which has been especially interesting this year specialty physician practices and home health and hospice and so when you look across all of these and and myself and my colleagues are going to be spending time in each one just know that our investment report has more detail and more data that you can look at and talk through as you go through your days ahead next slide really dives into a couple of the key components of what we're seeing and i'm going to turn that over to brett yeah thanks kristen so we think about this survey let's walk backwards a little bit first we think about where we were coming out of coven what you realistically found on the deal side is what i'd call a hyper market and it really picked up in basically the fourth quarter of 2020 and ran all the way through last year but like as steve alluded to there's a little bit of a slowdown in the fourth quarter and i wouldn't say it was actually a deal making slowdown fully there's a couple different factors that went on there one was for any deal of scale if you wanted to get government approval you basically had to submitted by november 1st and so what that is put a little bit of pause on what could get done and what couldn't the other piece is um from everything we've heard there was legitimately some market fatigue investment banks were being told by sponsors saying hey i'm just not going to look at the book i can't do it and so they held some processes out and so what we saw was coming through the year especially in the fourth quarter and it's kind of hung over a little bit into this year was probably a little bit of a delay in activity and so what i'm saying is what we can tell today is the february and into march we can see the activity picking up but there absolutely was a little bit of a slow down the market and i'll talk about this slide which is very interesting because this survey was done approximately october in november of last year and so what you see is at this time when we asked respondents what they believed said it's going to be even a better market next year in 2022 and i think what we'd say is nothing's necessarily changed our opinion on that but we absolutely did see a little bit of a slowdown in the fourth quarter and coming into the first quarter so let's go to the next slide and talk about what's changed since our survey respondents fill this out so obviously a lot of big things here and i'll share a little bit my perspective on the health care side than hand it around for everyone else as well one increased inflationary pressure no question we knew that was coming but we're seeing it become more and more clear on the health care side it's hitting heavily on labor we're seeing a lot of issues with that and i do think there's actually going to potentially be some pressure on organic growth because of some of the labor shortages the next piece is the geopolitical tension and obviously as we talk about this this is a business conversation it's it's you know i don't want to overlook that obviously it's a very concerning human issue as well so we'll move past that piece and just say what do we think it's going to do to impact our conversation here and i would say immediately it's obviously fairly recent we're not necessarily seeing anything in the deal world will deal with pausing or we're getting comments from you know our private equity team's capital markets group saying hey we can't get debt or anything like that obviously it's something we have to continue monitoring the next piece is as we've heard is interest rates rising i think i think it's interesting here is on the rising interest rates from the conversations i've had with our investment bankers and others the increase in rates in and of itself can impact deals but it's not necessarily the biggest issue we have right now the bigger issue or the bigger concern might be is if we see a change in the amount of debt leverage we can put on deals so for example in 2021 if you could get four times leverage on that if that goes down to three times leverage that's going to be a little bit more of a significant issue for getting the deals done because the potential returns that you can get based on your capital structure may change and so we haven't seen that happen yet that's when we're going to continue monitoring because in years past we've seen that happen what you find is potentially a little bit of a disconnect between buyers and sellers changes in the capital structure puts kind of a little bit of pressure on the return how much you can offer again 12 times 13 times 14 times but every seller once they have in their mind hey my friend just got 14 times for their dental platform they went 14 times and so again we haven't seen that today but that's the one that i'm launching a little bit more closely potentially to see do we see a couple bumps in the road maybe in the third quarter and fourth quarter if you see some pressure there there might be some disconnects between what buyer and seller expectations are then the last bullet here and i'll let ross talk about the health care side is just what are we seeing with the ftc policies obviously there was a lawsuit filed last thursday that's pretty interesting that does have a little bit of impact when we're seeing there so ross alternatively to talk a little more about what you see on the health system side yeah so brett thanks for mentioning obviously the united uh change health care deal but also on the hospital and health system side it's really interesting looking back a couple years ftc policy used to focus on uh health systems that were in the same market and there was a specific market test for market share across your individual service lines to see if there was too much concentration of market share but now we're seeing deals getting reviewed having comments just distributed once or twice for even deals that are in non-overlapping markets so obviously just from a might and size standpoint the ftc is looking closely at health system mergers even in in non-overlapping geographies maybe i should make some comments on the life science side i think on the life science side particularly around pharma the fdc in the early days of the biden administration came out saying they were going to re-review their approach to pharmaceutical deals in particular and i think other large life science deals there seemed to be a particular emphasis on any deal where they thought their implications for drug pricing where it might actually unduly raise the prices um on drugs that were part of that deal it'll be interesting to see how that progresses because i would argue that i think we've seen the industry from say since 2014 really move away from those spec pharma type deals where a major part of the deal thesis was to acquire sort of unique products that had unique attributes but then could also support a significant pricing increase you know today the vast majority of the deals we're seeing across the pharmaceutical industry really are focused on acquiring more innovation and building the pipeline for future revenues so of course it's harder to to make a judgment on what pricing might be four or five you know eight years down the road given the type of assets that are part of that so again i think it's very interesting to see how the fdc begins to review different deals particularly ones that are focused on pipeline building so far so good i think across most of the pharmaceutical industry um but again i think you know the the it will be interesting should it make a merger between two entities such as a adviogen where that will leave uh the industry will will those type of deals be approved moving forward or or a bms cell gene um i'm not sure in in this current environment we would see those kinds of approvals but again it's it's to be seen before still go on the one thing i'll pause on though is the the summary i'd give you is coming into 2022 i'd say there's a little bit more uncertainty coming into 2021 this time you know it looked very clear it was going to be a great market for m a we're not saying it won't be there's just a little bit more uncertainty here the things i feel a little bit comfortable about is hey we did see a little bit of delay and deals paused i think we're going to see a lot more deal activity pushed into the rest of 2022 i think the fourth quarter could still be very busy i think the third quarter is gonna be really really busy the other piece i'd say on the healthcare side for various reasons i think we'll see a little bit larger deals a lot of the deals we saw in the fourth quarter of 2020 and the first part of 2021 weren't that big saw a couple larger deals announced around the fourth quarter i think we're going to continue to see some bigger deals and bigger deployments of capital in 2022 and then the final thing i would say on the life sciences side from a geopolitical perspective is we are seeing more and more companies do much deeper due diligence in region as more regions have to be self-sufficient so for example when you're doing a global launch and you want to be able to launch globally and you have a companion diagnostic or some other type of lab service it's no longer possible to do that and cross border as easily as we would have before and so we need to look at our asia pacific corridors our european corridors and our americas corridors very differently and that's something that's increasing the level of scrutiny around the due diligence that our companies have to do on our deals and it's increasing the complexity of our commercial launches perfect so i think this takes us to our next poll question so what issues do you see having the most impact on the deal market for 2022 great so what we have on the slide here is just to revisit how the deal market has looked in 2020 and 2021 i think it provides really good context for what we're likely to see at least in certain really related to certain tailwinds um in 2022 so as you can see we've taken the approach that's a little bit different than other companies where we've looked at the total deal volume across the different life science sub-sectors here so the dark blue for example is biopharmaceuticals and the the lighter blue there is devices and that purple is actually biopharma labs services and so as you look across here while we do have the deal value in that yellow line um we are also tracking the deal the the m a volume and we think this is more important because if we actually included 2018 for example on here if you only look at deal value it can really skew how much capital how much activity is really going in through the industry so for example in 2018 we had the adv allergan deal and the bms celgene deal which were north of 60 billion each which could really skew the results from the typical deal volume that we see so i think the take-home point here is across all the sub-sectors as we went into 2021 really we kept accelerating in terms of the total deal volume from 2020 as you can see we topped out at uh 702 total deals across the sector pharma really remained alive throughout 2020 and 2021 there was a little bit of a dip maybe in the in in the very beginning of the covet pandemic in 2020 but it really accelerated through and maintained a lot of activity similar on the diagnostic side and i'll let kristen comment on that a little bit more in a minute but overall those are the sectors that really um really thrive through the pandemic and we expect there to be multiple tail ones that sustain them in the future which we'll talk about a little bit kristen are some things on the diagnostic front that you'd like to speak to yeah both in diagnostics and biopharma lab services you can definitely say that these days diagnostics is finally having its day in the sun i think that the coveted testing and the billions of dollars that was poured in has made our companies and diagnostics and lab services cash rich which allows them to both look at additional m a and really look to the future and very and very much plan for the postcovid onslaught of other types of testing that we go through i think that when you look at innovation post covid we've also seen that acceleration of innovation within diagnostics and lab services which allowed even more m a much more even than in 2020 and we continue to see that even going into 2022. if we go to the next slide where we have a couple of other highlights one thing a final thing i would say on the diagnostic side and on the biopharma lab services side is that really it's a convergence of ecosystems and so at the end of the day when you look at diagnostics companies buying lab companies or lab companies buying diagnostics companies and really being able to have an end-to-end solution for our biopharmas and for our patients worldwide we're seeing that because of the incredible m a environment that we're in today yeah i think you know as context for some of the tailwinds that we see and why even in in light of some uncertainties that we're facing in the 2022 market broadly speaking we're in a giant sort of cycle of innovation across life sciences it's everything from nucleic acid-based therapies what's happening in oncology precision medicine advanced analytics and ai to multi-omics digital transformation you know basically every part of that life science value chain is being disrupted or evolving in significant ways and it's creating a lot of investment across all the sub sectors be it in your cro cdmo space to keep up with all the innovation that's happening the pipeline um all the way to how biopharmaceutical companies are investing heavily in next generation platforms all that is to secure their future revenues and their pipeline has really been a big emphasis um the one segment that maybe we're leaving out here which we'll talk a little bit later on is the medical device segment so i'll save that for a bit but as i think you know the convergence of a few different key trends here is again that in the convergence of innovation but then the covid pandemic for many companies in the space really was a windfall whether it be on the diagnostic side or on the pharmaceutical side in terms of the pursuit of vaccines or therapeutics there's many companies now that are extremely cash rich you know pfizer just announced record sales that they expect for 2022 um with a guidance of 98 to 102 billion i know that was a little bit under what analysts expected but i mean we were still talking a sizable jump for for for their performance and i think that position even with this you know the stock market uncertainty with interest rates likely going up we're likely to see can we still put that those dollars to work um in fact there may be opportunities as you know as the market performs downward for certain companies to to be acquired at a little bit of a discount we do expect in our survey with ceos that valuations will still run run relatively high but again i think in comparison to where they were in 2021 and 2020 um we may see a little bit of a break on that as the the market maybe doesn't perform uh to the the nosebleed levels we saw uh last year you know i think when we we think about headwinds um you know of course we mentioned the cost of capital likely there's been multiple interest rate increases but even then most analysts that you speak to you know really see that as even if we get to like say four percent it's still you know historically at record lows and so it probably will not be too much of a deterrent to m a the ftc policy point that we made earlier is an area that we do think could create a little bit of a slowdown in certain areas whether it be how they were viewing financing how they're reviewing particular deals and the fit and the impact on the market so there may be certain types of deals that they that they really maybe put the brakes on a little bit but again i think through creative deal structures we're going to see a lot more of the pharmaceutical industry heading that way licensing deals again i think the industry will continue to find creative ways to structure deals that will enable them to to transact in fact we have another paper that'll be coming out in a little while that will look at overall deal volume in the bio pharmaceutical industry not just that m a but actually other types of deals from partnerships etc and a theme that we've been seeing for several years now are those creative deal structures we think that's really going to be the essential way and the other trend that's driving that frankly is some of the companies that have made big investments in cell and gene haven't necessarily seen those integrations pan out all that well retaining talent has been a huge issue um and and and therefore putting at risk the viability of really seeing the full fruits of the portfolios they've acquired and i think that's also giving the industry a pause on doing large multi-billion dollar transactions in that space that maybe it's really about keeping the carrot out there for these young innovative companies and making them work for those payouts so they get to a more of a mature place before thinking about integration so i think those trends are really going to be key um on this industry and and probably seeing more creative deal structures and and fewer full-on uh large acquisitions person are some additional points you'd like to make on diagnostics and services i think that you've hit the nail on the head with regards to innovation i think that within this industry overall we'll talk about med device again in a minute but overall other than the medical device space we've just seen such incredible momentum with all different types of creative structures in our deals and in our strategies to be able to still produce the best that we can for patients even through a major pandemic and a worldwide pandemic and so i think that those of us that spend all of our time in this industry can be pretty proud of our industry but we also know we have a lot more work to do and so as as brett was mentioning with some of the challenges as we move forward into 2022 we're already starting to see some of those components really come into play and we'll need to be watching those and really working towards very complex and really thorough due diligence to make sure that the deals that we're doing in 2022 are as fruitful as the ones that we've seen moving forward i think that next we have a poll another poll question so we'll go to that slide right now and so if you think back to what jeff just said we're doing a little bit of a quiz for you what are the projected to be the top deal types in biopharma and so we'll leave this up on the screen for a minute hey jeff and kristen maybe while we're pivoting to the next slide maybe a question for you if we think of how much of the deal flow for 2022 might be related towards some of the pharma companies device companies looking at their portfolio and doing some rationalization and doing a round of divesting and then reinvesting and how much did you see that as a trend kind of going forward compared to 2021 yeah i think for certain companies we'll definitely see that um you know disposing or carving out a lower performing portfolios will certainly be a trend that we're seeing and we already saw mercer take the first shot of this but i think we'll see other companies obviously it's public uh been publicly announced that sandoz for example may be up for auction later this year uh from novartis so that's out there i think we're going to see more and more of companies review that that said in for some of the innovative uh big pharma companies some of those established product areas are still healthy cash flows that they want to keep um as sort of their base so i think it's it's really a case-by-case situation in terms of whether or not those will be carved out or not but you know i think the the story in certain categories um will remain you know what it's been so areas of women's health that probably not going to be the most attractive area for the top innovative companies to perform and that doesn't mean there isn't good value there but that means more mid-market players may be looking in spaces like that you know similarly you know bioslimmers i think is an interesting space right now for the industry um you know it wasn't that long ago where pfizer and others were making really big bets in that space um and i think that's transitioning to more of a mid-market play with maybe a couple large players left trying to you know really find value there so i think we're we're really in an interesting time period where we will see some carve outs in 2022 and 2023 as coming to revisit the portfolios and the performance there and across the life sciences service sectors what we have seen is some rationalization there as well you know you can build a service organization to serve just about anything with regards to pharma and clinical trials but there are certain areas that we're doubling down on there are certain areas where we're putting them more towards our core clinical labs and that will continue to um mature over the next year and maybe the other area we shouldn't forget is just the the the crazy town that pe has been in the last two years with farmer services and other types of life science service companies it's we've seen really high valuations and multiples on deals there um particularly things that are related to the nucleic acid value chain so if you are a cytokine cdmo you know viral vector cdmo if you're in the cro space on analytics all those things are red hot commodities there aren't enough of those companies i think for pe to find and invest in i think we'll continue to see some really young up and coming companies in 2020 and 2023 and starting in 2022 and 2023 uh eventually mature enough to be be invested in but you know early on and or i would say towards the end of 2021 people were really looking for those other next plays that were the aldeverons or peppertex because those were such great successes from a pe standpoint so again we'll see the we'll see pe scouring the earth for those types of targets now if we want to go to the next slide we'll cover some med device i think that med device is always one as we go through this pandemic that has just really taken some hits and at the end of the day um you know ppe and respiratory devices and consumables were always of course hot as we went through the beginning of the pandemic but electric surgeries came down and that really hurt our medical device industry a lot of revenue uncertainty is specifically those with that exposure to the elective surgical procedures however most of the companies that we've seen that experience those revenue disruptions earlier on have seen a significant bounce back as different regions open up worldwide because of kovid in covid lessening and our elective procedures come back and there's that backlog of patients that not only needed to have their elective procedures before but now they need to have them now we're really expecting that continued growth in um in 2022 and we also see that our medical device companies though are becoming even smarter so divesting where they need to divest doubling down where they need to double down and really looking at performance improvement opportunities with some strategic bolt-ons as they especially if in the multi-discipline companies that may have diagnostic companies also along with them being able to take some of that cash and put it into innovative medical device moving forward so not entirely a bad um situation within medical device and we're going to continue to see that bounce back that we're that we started seeing last year and i believe we have one more um poll question so we'll go to that next in this section and that is another quiz for you what sub sector fared least well in life sciences so we'll put we'll leave that up for a minute and then we'll turn over to our colleagues in healthcare to discuss the healthcare landscape perfect kristen thank you so i think ross now tag team through this but the the first sector to talk about is health carity and it's very interesting as always our survey responds ranked telehealth electronic health records clinical workflow as the most attractive for investment um i think just about every year we've done this survey healthcare it is number one generally or it's it's close to number two uh so i don't think that surprises us if we walk back and think about where the subsector's been it's been very interesting eight years ago ten years ago the original investing was heavily going to be more venture investing if you guys remember back population health management tools and things like that that were invested in 10 years ago and you bring that forward as we see it maturing and even the last two years maybe three years we're starting to even see middle market health care i t where the growth thesis is hey we'll knock out the back office and we can get a little bit more scale and so then even today and we see some of the big deals that occurred towards the end of the year with athena health you're now seeing even really really large leveraged buyout kind of deals and so it's been very interesting to watch how this sector has continued developing as it goes through there as we think about what do we expect for 2022 and 2023 i don't see much of a pause in health carity investing i think it's going to continue i think the areas because of some of our labor issues i think any of the solutions that can help with those type items are probably going to be even more attractive in the short term now ross will hand it off to you to get your thoughts yeah thanks brad so i mean from uh from a product and service offering perspective hcit has been really hot obviously a lot of deals on patient engagement remote patient monitoring healthcare sas kind of platforms revenue cycle a lot of ehr data and analytics and what i'll call payer middle office capabilities and the competition for these assets has been hot so they're to brett's point there's standalone there's private equity interest there's also provider and payor interest for some of these assets um basically a competition for who owns the patient or who owns the member um going forward and where does their loyalty stand and in terms of deal thesis or value creation i mean it is almost a convergence of offering it's expanding um access to additional lives to powering up new revenue streams to building kind of what i'll call payer agnostic capabilities for certain payors um and then obviously g a plays as some of these platforms come together there's an ability to kind of scrape out the gna of one side and create significant cost synergies uh brett back to you to for health systems yeah perfect and so i i think obviously ross you spend more time in health systems than i do but the interesting piece here was when we look at the deal activity they were very active but it wasn't necessarily mergers or affiliations a lot of the activity we saw was across the continuum of care so ross would love to hear a little bit more about what you saw there in 2021-2022 that's exactly right brett so on on one of the previous slides we highlighted that there was a huge uptick in health systems and hospital deals and to your point that's not just health system the health system or hospital hospital transactions that can include transactions for ambulatory surgery centers for physician alignment deals and for other continuum of care deals as well as there have been a number of commercialization in other transactions starting kind of from the top as we think about kind of vertical horizontal vertical and kind of new business models there were a couple large deals you recently saw a spectrum and beaumont come together but some of those large deals were blocked um as you think about steve's prior comment about pruning the portfolio with regards to to biopharma you're seeing the same thing with health systems there are certain aggregators out there both publicly traded and private ones that are pruning um kind of assets or divesting certain individual hospitals in markets that aren't core to them and then conversely health systems that have significant share of wallet or market share in certain markets are picking them up to densify their standing in certain markets um there were a preponderance of deals in in terms of vertical integration like i talked about um particularly with regards to physician alignment there are certain especially we'll get into especially physicians here in a second but there are some physician specialties where private practice has been declining in terms of market share and you're seeing health systems and private equity aggregators gain market share some of those being some of the hospital-based services like anesthesia and whatnot and then you're also seeing health systems continue to seek to diversify their revenue streams and their acute care diversify themselves away from acute care revenue as you think about the business model for acute care hospitals they're not seeing the types of increases in volumes and reimbursements that they are seeing on the cost inflation side so they're seeking very actively to diversify their revenue not only in the other continuum of care settings and and some of those are outside of their core markets but also commercializing products forming partnerships with technology companies doing venture investing etc and the last thing i'll mention is around kind of the challenge of staffing and nurse staffing so you're seeing a lot of challenges from a health system perspective trying to get access to adequate clinical staffing on the nurse and extender front and you're seeing a ton of private equity platform deals on the nurse staffing side so back to you brad on behavioral health yeah perfect thanks for awesome so this one's another kind of mainstay of top places to invest if we think about behavioral health even three years ago five years ago the majority of investing was probably mainly in substance abuse we think about where we've been with the opioid crisis and things like that we've seen a shift certainly there was a little bit of substance abuse investment last year a really nice business in nashville traded that was probably 60 70 subs abuse 30 more psych but we've seen is kind of a little bit more of a shift towards what we call the side side which could be autism inpatient psych eating disorders things like that and so we've seen a lot of investing going there and the things we know is i and i actually agree with the comment that 80 respond expect valuations to rise as we think about an area that's really got some tailwinds from coving it's got to be behavioral health we all recognize the cost of behavioral health of the system things have to change for us to manage the true cost of the population but then the additional stress from covin that's come to all of us is really kind of making this area a little bit harder to invest in the one thing a piece or last piece i'll add there is we've actually seen like a lot of the areas in health care labor's becoming a problem as well we saw a really nice business that came out early in the pandemic great thesis great themes all these things were very doing very well and you know national contracts all the things that you want to see for scale uh healthcare services businesses but they're starting to hit some problems because they can't continue growing based on the problems maintaining talent and so we're seeing a lot of different places but behavioral health certainly is hitting those issues as well across anything you want to add there yeah i would say a couple things we're seeing one is on the health system side we're seeing some health systems take on kind of a mission orientation and knowing behavioral health isn't a particularly profitable service line for them perhaps because of payer mix and other things they are finding it important to serve their communities and build out those capabilities and then to your point brad about the multi-sites that are private equity owned and other aggregators i mean some of the value levers or thesis we're seeing there is around reimbursement so obviously for payers behavioral health continues to be a huge challenge um as a comorbidity in in driving up medical costs so we are seeing payers preferentially pay higher rates for for aggregators that provide just wide and broad access around the country um we're also obviously behavioral health is one that was the the downstroke in volumes were blunted by the advent and increased utilization of telehealth so the benefits of telehealth have maintained volumes but on the other hand it's provided some operating model challenges so you you see a number of um what i'll call you know clinics or storefronts that are running kind of a dual track between in-person and telehealth and they're trying to figure out how to effectively staff those up from a clinician standpoint to maintain economies of scale and then to brett's point you know staffing challenges do remain persistent and are prohibiting growth i would say growth being as as robust as it could be so we're seeing some clients that are looking at doing white space growth work and them having us utilizing the criteria of kind of clinician availability as a major input or criteria for that for that prioritization so brett back to you for uh special to kick off specialty positions yeah perfect thanks ross so we think about special physicians uh really interesting sub sector and we talk about where they've been where they're going you know i always like to divide this up basically based on acuity and so your higher acuity oncology things like that versus your lower acuity dental urgent care optometry things like that it's a little bit of a tale of two halves code was obviously very hard on a little bit more of the retail businesses and generally the lower acuity so in 2020 we didn't see many dental deals come out in the fourth quarter start getting through the summer of last year in 2021 and through the fall we did see a lot more activity there and as we look forward to project that obviously omicron put a little bit of a bump in the volume but we do expect to see more and more business coming out there the one thing that is interesting on some of the lower acuity more retail healthcare businesses last year was i felt like the bar for the quality of the asset was actually a little bit higher in 2021 than you'd expect and what i mean by that is we saw several deals on the sell side the buy side that never traded and those deals were probably just a little early coming out their infrastructure wasn't quite where you'd want it to be and that deal generally would have gotten done in 2019 maybe 2018 but in 2021 i do think buyers were a little bit pickier now again there's a significant amount of demand for those assets hey the price is high but it did feel like the bar for what the quality of the portfolio quality of the platform had to be got raised just a little bit um ross i'll pause going off to see what else you've been seeing on the special position practices sure i mean i think brett i think we're segmenting them into probably three segments i'll think about them one is the more established platforms around dental vision and dermatology we're starting to see some major consolidations there between some of those and you're seeing a lot of interesting synergy work there between not only revenue synergies so service mix and pollination of services um that maybe one or the other didn't offer each other's patients in overlapping markets through all the way through kind of clinic level and mso synergies um secondly we would be the platforms that are quote-unquote kind of building so things like women's health oncology others some of those interesting deal thesis is there some of those are actually started to take risk um that we're seeing but obviously white space is a huge um value lever there and then thirdly what i'll call kind of emerging platforms some of the cardiology um kind of neurology nephrology things like that where um obviously things are just initially kicking off i think some of those provide some pretty interesting deal thesis around pulling technical fees and volumes out of the hospital so there's an opportunity to kind of search for markets where services are still predominantly done in hospitals relative to other markets they're more early on the evolution chain um i think we're seeing some strategics venture into um position acquisition here particularly for example take uh you know take ones that have other care delivery capabilities like ascs you're seeing them look at things like orthopedics cardiology neurology again um etc just to kind of get those revenue synergies and and kind of cross pollinate or feed the downstream um and then lastly around you know risk bearing physicians we still continue to see a lot of activity there lots of interesting deal thesis there around risk scoring um in filling current markets with more members or attributed lives you know medical cost management reduction mso commercialization etc and then urgent care this is one where there's been a huge spike um in patients um going to urgent care particularly with regards to covid so i think some of the urgent care centers that have had the spikes in volume are trying to figure out do these patients that came in for covet and covet-like services look like our normal quote-unquote normal patients and will they be as loyal going forward and that's a particularly important question on the sell side when you have an asset that's for sale what is the true kind of pro forma going forward in terms of revenues yeah that's an interesting point is i would say on the lower acuity side urgent care was one that was really pretty absent for most of 2021 and 2020. we did see a nice business in florida trade to a strategic at the end of last year but that's an area i looked to see a little bit more active this year because it's very challenging last year the thesis say hey is that volume going to return is this just a coveted business and is covered temporary and again i think most of us are moving towards saying i'm not sure cove it's temporary and i think it's going to be part of the themes that were really positive for urgent care like physician access and how does that become access to a pcp i think we're going to have a lot more conviction those so i expect to see a lot more urgent care deals actually in 2022 and 2023. the one last thing i'll say before you jump off especially physicians it's been really interesting to watch this sub sector grow up if you think about 10 years ago it was heavily lower middle market pe maybe middle market pe and we'd see assets dental and things like that come out first time we saw them is 75 million of revenue all right four years later after that whole period we'd see them again they were 200 million of revenue and so we've seen now those that transition some of these businesses are getting very very large a lot of our clients that always ask us said hey brad hey ross we appreciate you helping us buy them we appreciate you know the optimization work you've done but the questions are getting a lot of us now is different of saying hey we really need a lot of help with erp implementations we need a lot of help with systems implementations the things we weren't talking about five years ago or ipo exits so it's been very very interesting to watch this sub sector really grow and now there's a lot of big businesses over a billion dollar top line where the only logical exit is most likely an ipo so again really interesting to watch this sector grow up maybe the next one i'll jump into is home health and hospice as we work backwards there a lot of the key themes for investment are still there it's an aging population it's the right cost setting it's all those things that are there i think if you talk to so the fundamentals are great i think if you talk to a lot of the corporate development folks uh at the larger strategics who say problem we have now is that it's a very busy place for acquisitions and trying to get any acquisition of scale is going to be more and more expensive and so when we look at this one said hey really like the sector a lot of great tailwinds i expect to see some larger transactions done this year for various reasons um but it's it's one that's really getting hit heavily by labor as well so you might see again my comment on organic pressure i'd expect to see a little bit here on home health and hospice yeah your last point brett is actually really interested is really interesting i think with the advent an increase of personal care also which we've seen kick up in the last kind of 12 months personal care is an area that's picking up a lot of steam with covet and obviously with the age of the population there's huge competition for labor for from those folks as well from home health and hospice but on the deals that we've seen i think the deal thesis continues to be a little bit more revenue in orientation we've seen kind of private equity companies with either sniffs or risk bearing physicians or others look at buying home health and hospice assets and try to calculate the amount of revenue synergies via more referral integrity and referral loyalty volume there so i think that's pretty important and then also kind of the preferred provider agreements with health systems and trying to preferentially steer volume there to whole mouth and hospice as well yeah i think it'd be really interesting to watch this sub sector and impact of risk has on it and i don't think it's a one or two year type thing but over the next five years to see how this we can see it working around the fringe right now but i think it's going to get more and more pressure in the coming years totally agree totally agree so i think we'll move on to our next polling question so what sector do you expect to have the largest valuation increase in the coming 12 months maybe before we get into the path forward and and kind of as a wrap up you know a couple of questions that i i've seen come across and and and one kind of thinking through this last comment on home care hospice how do we see some of the potential distribution type companies trying to add some of these sort of services to kind of have a full end-to-end kind of customer value chain do you see that happening in 2022 or do you see the kind of the those larger distribution companies not getting into that space so maybe ross or jeff or or ross or brett any any thoughts on that yeah i think owning the i think it's it's an interesting way i think they would they need to figure out would need to figure out where to play in the value chain is is it through the distribution or is it through other other fronts i think owning um home health and hospice overtly is a very expensive proposition i mean as brett would tell you valuations are extremely high but i think to your point steve there are winners and losers amongst the device manufacturers and things like that around kind of from a market share perspective that are seeking ways to kind of push market share in the market good deal one thanks thanks thanks ross another another question that that came in was around some of the headwinds and and how we'd see that headwinds with inflation and will that have an increased cost of capital what do we see that might drive there any any any thoughts on that maybe jeff or chris and kind of throw it to you guys you know i think it really depends on the deal types i think you know for the most part when pharma is pursuing innovation you know i i don't think for most companies given how well many of them perform through covid um and came out cash rich i don't think it will be a huge headwind um you know do you know even with jp morgan you know predicting seven rate increases i don't think it's going to be a huge deterrent because they they need to preserve those pipeline assets because you know that's their bets on future revenues um i'd also argue there's so much competition over innovative assets and and the need to be first to market um that's going to be a stronger poll than than the cost of capital at this point yeah thanks for that jeff and and kind of recognizing where we're at from an overall time perspective just maybe a couple of things here hopefully i think you can you can tell that we're still we're we're very excited on on the m a front and what we see you know coming from 2021 that's been driving 2022 really across all the sub-sectors that we hit today i don't think there's one that we called out and said is just going to continue or is going to decline in a rapid fashion in 2022 so a lot of excitement there i think jeff your last point is we're all still looking for those kind of diamonds in the rough right those innovative assets at a price that we can afford that's not that's not getting out there you know extremely high uh but in the same vein i think we're also seeing a lot of new and creative deal structures i think tristan you talked about this earlier we're seeing more jv's we're seeing more alliances vc funded acquisitions or investments there kind of the try before you buy and then we're seeing them some some of those now kind of going through all the way to the end so a lot of good excitement i think i'd say hopefully today you've heard some some uh you know some interesting points that you can bring back that's specific to your your sector and sub sector uh again i want to first of all thanks the panel for jumping on today and then also thank everybody for taking the time out of their day uh hopefully you got some some good information coming out of this also please remember that you have to check out here that popped up pretty quick uh answer that last question so you can get that cpe credit and just want to thank everybody for taking their time we look forward to hearing more from you if there's any questions or you want to you know dive into some of the specifics and deeper please feel free to reach out to us and uh look forward to a happy and safe 2022. i think we'll leave this up here for a couple seconds so people can answer it and when you did thanks everybody have a great day you