sdr-uyfpxh6dk.netdna-ssl.com...Wright Medical Group Inc. (NasdaqGS:WMGI) Wright Medical Group acquired Solana Surgical for $84.8 million in cash and stock. Wright acquired 100% of

Securities offered through Colorado Financial Service Corporation. Member: FINRA-SIPC. SDR Ventures and Colorado Financial Service Corporation are separate entities

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A perfect storm has brewed within the healthcare industry as a result of the parallel forces of eroding margins (hospitals may

see 0% margins in 2014, down from about 4% in 2013) and increased competitive pressures (e.g. the paradigm shift to

consumerism). Progressive executives within the three largest industry segments are approaching this challenge by insulating

core revenues with customer-centered service models. Hospitals are consolidating and centralizing their supply chains.

Equipment and technology firms are focusing R&D spending on solutions for clinical IT and analytics, operations management

and efficiency, and education, training and compliance.

Despite seismic shifts in the landscape, January reported an astonishing 227 deals in the middle market, quelling concerns

surrounding a dismal 2014. All total, Q1 reached 562 deals, on par with previous years. Capital formation also exceeded

expectations with healthcare REITs, for example, raising nearly $2 billion in March. If Q1 is any indicator for the remainder of

the year, industry majors will drive consolidation and integration horizontally and upstream, boding well for lower middle

market companies that can provide benefits to patients and help reduce utilization among service providers.

If you have any questions please contact us.

- Chris Bouck, Principal - Travis Conway, Director

TRANSACTIONS # BY SEGMENT (Q1)

STRATEGIC VS. FINANCIAL TRANSACTIONS HIGHLIGHTS

STRATEGIC ACQUISITIONS

1.13.14

2.20.14

3.12.14

Vocera Communications acquired the assets of mVisum for $3.5 million. Vocera expects the transaction to be accretive in 2015. Syneron, Inc. acquired New Star Lasers for $11 million upfront cash and $4 million in earnouts. EKF Diagnostics acquired Separation Technology for $4 million cash. Separation reported $0.5 million EBITDA FY ‘13.

FINANCIAL ACQUISITIONS

1.9.14

Altaris Capital Partners signed a definitive agreement to acquire Health Tronics from Endo Health Solutions for $140 million.

270

152

116

14

0 50 100 150 200 250 300

Providers & Services

Equipment & Supplies

Technology

Laboratory Services

Strategic 52%

Financial 18%

Undisclosed 30%

Source: CapIQ


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US HEALTHCARE M&A ACTIVITY

HEALTHCARE TRANSACTIONS # OF TRANSACTIONS BY QUARTER

Date Target Buyer Transaction Comments

03/04/2014Health Care Compliance

Strategies, Inc.

Healthstream Inc.

(NasdaqGS:HSTM)

Healthstream acquired Health Care Compliance Strategies for $16 million. Health Care Compliance

Strategies reported revenues of $6.8 million for the year ended December 31, 2013.

01/13/2014 mVisum, Inc.Vocera Communications, Inc.

(NYSE:VCRA)

Vocera Communications acquired assets of mVisum, Inc. for $3.5 million. Vocera expects the

transaction to be slightly dilutive to 2014 earnings and expects it become accretive to earnings in

2015.

01/30/2014 Solana Surgical, LLCWright Medical Group Inc.

(NasdaqGS:WMGI)

Wright Medical Group acquired Solana Surgical for $84.8 million in cash and stock. Wright acquired

100% of Solana's outstanding equity on a fully diluted basis for total consideration, net of acquired

cash, of $90 million, consisting of $47.6 million in cash and $42.4 million of Wright common stock.

02/20/2014 New Star Lasers, Inc. Syneron Inc.

Syneron agreed to acquire New Star Lasers for $15 million in cash. As per the agreement, Syneron

Medical w ill pay $11 million in cash and up to $4 million earn out based on certain milestones until end

of 2015. New Star Lasers reported unaudited revenues of $8.9 million for 2013.

03/12/2014 Separation Technology Inc.EKF Diagnostics Holdings plc

(AIM:EKF)

EKF Diagnostics Holdings acquired Separation Technology for $4 million in cash. Separation

Technology posted 2013 revenue of $4 million, EBITDA of $0.5 million and net assets of $1 million. The

transaction is expected to be earnings enhancing in 2014.

03/05/2014Tw o Skilled Nursing Facilites In

Colorado Springs and Fort Pierce

Sabra Health Care REIT, Inc.

(NasdaqGS:SBRA)

Sabra Health Care exercised an option & acquired 2 skilled nursing facilities in CO Springs for $24.5

million. Sabra had an option to buy 2 skilled nursing facilities in connection w ith a $12.4MM mezzanine

loan originated in June 2013, secured by the borrow er's equity interests in 12 skilled nursing facilities.

01/02/201440-Unit Assisted Living Facility in

Redding, CaliforniaSummit Healthcare REIT, Inc.

Summit Healthcare REIT acquired a 40-unit assisted living facility located in Redding, California for

approximately $3.5 million.

01/09/2014 HealthTronics, Inc. Altaris Capital Partners, LLC

Altaris Capital Partners agreed to acquire HealthTronics from Endo Health Solutions for $140 million.

Under the terms of the deal, Altaris Capital Partners w ill pay $85 million in cash upfront, subject to

certain cash and w orking capital adjustments.

$0

$50,000

$100,000

$150,000

0

1000

2000

3000

2010 2011 2012 2013 As of Q1 2014

Cap

ital Inve

sted

(in

$M

il) D

eal

s C

lose

d

Deals Capital Invested

Source: CapIQ

Source: CapIQ


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The market appears to have rewarded companies for making smart capital outlay decisions in Q1. Abbott Laboratories (NYSE:

ABT), for example, experienced sharp declines in equity value after its earnings call in January, but rebounded in February after

announcing two acquisitions of diagnostic device manufacturers. Likewise, St. Jude Medical, Inc. (NYSE: STJ) was rewarded

with a 12.4% spike in equity value for its outspoken initiative to invest in R&D and acquisitions to bolster its position as a leader

in patient-centered, cost/value positive products and services. That said, the industry slightly trailed the broader market in Q1

from concerns surrounding risks inherent in pushes toward greater accountability. The public basket can overcome these

concerns in future quarters by increasing process efficiency, which will drive profitability in an uncertain landscape.

Market Cap Stock Price Stock Price Change Price/ Price Price/ Price/ Company Name Symbol State ($ in Mil) (3/31/14) Monthly YTD LMT EPS Book Sales EBITDA

MedAssets, Inc. NasdaqGS:MDAS GA $ 1,144.62 $ 19.25 4.22% 14.79% 67.6x 2.6x 3.2x 10.4x PharMerica Corporation NYSE:PMC KY $ 413.59 $ 14.00 (2.30%) (1.69%) 10.6x 0.9x 0.4x 6.9x Analogic Corporation NasdaqGS:ALOG MA $ 967.28 $ 79.02 6.51% 6.35% 33.0x 2.1x 1.5x 12.4x AtriCure, Inc. NasdaqGM:ATRC OH $ 165.50 $ 7.92 (10.81%) 14.78% NM 10.7x 2.3x NM

Edwards Lifesciences Corp. NYSE:EW CA $ 9,406.50 $ 82.16 (4.39%) (8.88%) 38.2x 6.3x 4.8x 19.5x Mindray Medical International Limited NYSE:MR NA $ 4,752.86 $ 39.94 6.20% 22.14% 35.4x 3.6x 3.8x 17.4x

Cardinal Health, Inc. NYSE:CAH OH $ 22,814.08 $ 66.81 3.42% 62.24% 18.7x 3.6x 0.2x 9.5x AdCare Health Systems Inc. AMEX:ADK GA $ 58.65 $ 4.00 (9.48%) (15.77%) NM 2.8x 1.1x 12.0x Emeritus Corp. NYSE:ESC WA $ 1,278.15 $ 27.79 (2.46%) 12.42% NM 6.0x 3.8x 20.8x Lifepoint Hospitals Inc. NasdaqGS:LPNT TN $ 2,275.10 $ 48.46 9.91% 28.37% 15.0x 1.1x 1.2x 7.4x Alliance Healthcare Services, Inc. NasdaqGM:AIQ CA $ 80.58 $ 7.77 10.37% 21.79% NM NM 1.4x 4.3x CorVel Corporation NasdaqGS:CRVL CA $ 535.68 $ 24.75 3.02% 10.39% 22.4x 4.9x 1.2x 9.2x National Research Corp. NasdaqGS:NRCI.B NE $ 399.49 $ 16.52 1.63% 6.65% 29.0x 7.0x 4.7x 14.7x Omnicare Inc. NYSE:OCR OH $ 4,260.87 $ 40.72 9.29% 12.80% 16.7x 1.2x 0.9x 8.3x Magellan Health Services Inc. NasdaqGS:MGLN CT $ 1,284.74 $ 47.57 (7.74%) (2.92%) 11.2x 1.3x 0.3x 4.5x WellCare Health Plans, Inc. NYSE:WCG FL $ 2,504.78 $ 57.96 1.35% 19.04% 13.7x 1.9x 0.2x 4.9x Average $ 3,271.40 $ 36.54 1.17% 12.66% 26.0x 3.7x 1.9x 10.8x

HEALTHCARE INDUSTRY VS. S&P 500 RUNNING 12 MONTHS

Source: CapIQ

Source: CapIQ


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Valuations in the Healthcare Technology segment soared in the second half of 2013, but normalized in Q1 despite YTD equity

value growth in excess of the rest of the industry. Meanwhile, valuations of Healthcare Providers and Services experienced

nearly zero volatility over the past year, though equity values outpaced other segments over the same time period. Equipment

and Supply manufacturers could experience higher than usual growth in future quarters, though Q1 was mixed for the

segment. Medtronic, Inc. (NYSE: MDT), one of the segment’s most well-known names, finished the quarter strong with the

adoption of new products in its cardio and vascular categories. After Apple Inc.’s (NASDAQ: AAPL) acknowledgement in

February that it intends to release mobile devices in the B2B MedTech space, industry majors like MDT will be keen to protect

market share with increased R&D budgets and acquisitions.

HEALTHCARE SEGMENTS VS. S&P 500 RUNNING 12 MONTHS

Market Cap Price/ Price/ Price/ TEV/

Segment Averages ($ in Mil) Month YTD LTM LTM EPS Book Sales EBITDA

Healtcare Providers and Services 4,349.21$ 4.4% 10.8% 14.2% 44.45x 3.39x 4.66x 24.14x

Healthcare Equipment and Supplies 3,123.94$ 4.0% (2.8%) 0.3% 35.37x 5.73x 8.82x 15.57x

Laboratory Services 3,075.91$ 1.1% (0.8%) (6.2%) 26.39x 2.35x 1.39x 6.10x

Healthcare Technology 1,646.15$ 5.8% 22.1% 10.3% 74.39x 6.45x 5.22x 25.86x

Industry Average 3,440.07$ 4.2% 3.8% 6.6% 33.19x 4.68x 5.79x 13.78x

S&P 500 Average 29,406.34$ 3.6% 10.0% 11.4% 25.99x 4.14x 2.81x 11.20x

Stock Price Change

Source: CapIQ

Source: CapIQ


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COMPANIES BY REGION HEALTHCARE COMPANIES BY REGION AS OF MARCH 31, 2014

COMPANIES BY SIZE

*Revenue in millions

West Coast, 25%

Southwest, 6%

Mountain, 11% Midwest,

2%

Great Lakes, 10%

Southeast, 25%

N/A, 6%

Northeast, 13%


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CAPITAL STACK

US MIDDLE MARKET M&A ACTIVITY

TRANSACTION MULTIPLES EBITDA MULTIPLES BY TRANSACTION SIZE

$0

$20

$40

$60

$80

$100

$120

$140

0

100

200

300

400

500

600

700

2013 1Q 2013 2Q 2013 3Q 2013 4Q 2014 1Q

Cap

ital Inve

sted

D

eal

s C

lose

d

# of Deals Closed Capital Invested ($B)

5.x 5.0x

2.5x

5.4x 6.6x

5.3x 6.4x

7.4x 6.5x

8.4x 9.5x 9.x

9.0x 9.8x

11.6x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

2013 1Q 2013 2Q 2013 3Q 2013 4Q 2014 1Q

$0-25M $25M-250M $250M+

Source: PitchBook/CapIQ

Source: PitchBook


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\

Chris Bouck Principal – Healthcare Team p: 720.221.9220 e: [email protected]

TRANSACTION ADVISORY

Buy Side Running a proven process effective at generating responses, identifying “off-the-radar” opportunities, negotiating and closing accretive acquisitions. Sell Side Our process is designed to identify the “right” buyer and maximize shareholder value for our clients.

CAPITAL FORMATION

Private Capital Placement An effective and efficient process negotiating favorable debt and equity with the right capital partner for our clients.

Address Website Phone 5613 DTC Parkway, Suite 820 │ Greenwood Village, CO 80111 www.sdrventures.com 720.221.9220

Travis Conway Director - Healthcare Team p: 720.221.9220 e: [email protected]

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sdr-uyfpxh6dk.netdna-ssl.com...Wright Medical Group Inc. (NasdaqGS:WMGI) Wright Medical Group acquired Solana Surgical for $84.8 million in cash and stock. Wright acquired 100% of