Dermatology practice consolidation and private equity in North Carolina took a surprising turn in March 2018 when DermOne exited the North Carolina market where it had six offices. The announcement came after Schweiger Dermatology Group acquired DermOne's offices in New Jersey. DermOne also exited Texas and Virginia, the two other states where it had offices.

Despite DermOne's exit, consolidation continues to accelerate among dermatology practices. As we noted in a previous blog post, more than 20 private equity groups have acquired dermatology practices in the U.S.

Several dermatology practices in North Carolina were acquired subsequent to the DermOne announcement and private equity firms continue to view North Carolina as an attractive market. Barry Baker of The Cobble Hill Group recently provided M&A advisory services to Bain Dermatology, P.A. in its sale to QualDerm Partners, LLC.

Here are some key facts about the NC dermatology market:

• Large, growing population - with an estimated population of 10 million people in 2017, North Carolina is the 9th most populous state, the 12th fastest-growing  (on a % basis), and had the 5th largest increase in the number of people in the U.S. 
• Concentration of dermatologists - North Carolina has a lower than average number of dermatologists on a per capita basis, with 2.8% of the dermatologists and 3.2% of the population in the U.S.
• Penetration by private equity - According to a recent article published by the law firm McGuireWoods LLP, "Dermatology remains highly fragmented...with roughly only 5% of the industry currently consolidated." By contrast, Cobble Hill Group estimates that approximately 7% of dermatologists in North Carolina are now affiliated with a private equity backed company. ​Although this estimate is higher than the U.S. average, it is substantially lower than Florida, where approximately 18% of dermatologists are now affiliated with a private equity group.

The interactive map below shows the North Carolina office locations for two large, dermatology companies that currently have private equity investors. We also included Integrated Dermatology's offices on the map; although it does not have a private equity investor, it is one of the most active acquirers of dermatology practices in the U.S.

The Cobble Hill Group provides M&A and valuation services to physician practices. For information about our firm or data for other states, please contact us at [email protected].

Below is information regarding each company on the map. It is interesting to note that all three, including those with offices across the U.S., have their headquarters in the southeast U.S.

​​Owner - Jeff Queen and possibly others (no private equity ownership)
Date Acquired / Invested - n.a.
Headquarters - Boca Raton, FL
North Carolina Offices - Raleigh-Durham area
Website - https://www.mydermgroup.com/
Locations - AZ, CA, CO, DC, FL, IL, IN, LA, MD, NC, NV, OH, VA, Other (according to a press release, IDG provides care in 28 states)

​Owner - Cressey & Company / Apple Tree Partners
Date Acquired / Invested - February 2016
Headquarters - Brentwood, TN
North Carolina Offices - Strong position in central and western North Carolina
Website - http://qualderm.com/
Locations - NC, OH, SC, TN, VA

​Owner - Pharos Capital Group
Date Acquired / Invested - January 2016 (acquired from Carousel Capital, which invested in 2004)
Headquarters - Charlotte, NC
North Carolina Offices - Offices in Charlotte, Raleigh, and Greensboro 
Website - https://www.sonamedspa.com/
Locations - AR, NC, TN, TX, VA (according to a press release, Sona has offices in 7 states)

​Related Blog Posts:
Dermatology Practice Consolidation and Private Equity in Florida
Consolidation in Retail Healthcare...We've Only Just Begun
Private Equity and Consolidation in Dermatology (Private Equity Platform Companies Per State)

About The Cobble Hill Group LLC:
The Cobble Hill Group provides M&A and valuation advisory services, with a focus on fragmented and consolidating industries including healthcare services and physician practices. For additional information, please contact Barry A. Baker, CFA directly at [email protected], at 877.814.4115 or through LinkedIn.

Find Venture Debt LLC, an affiliate of Cobble Hill Group, has compiled a list of the top 36 private equity firms, growth equity funds, and mezzanine lenders with offices in North Carolina listed by city.

As a supplement to the list, we provided answers to a few frequently asked questions (FAQ):

• What is private equity?
• Comparison of private equity vs. venture capital vs. growth equity.
• What is mezzanine financing?

Click here for the Top 35 PE Firms and FAQ.

Updated August 20, 2018.  The June 2018 acquisition of Water's Edge Dermatology by Gryphon Investors was the eighth major investment by a private equity investor in the Florida dermatology market. Florida is on the leading edge of the consolidation that is accelerating among dermatology practices. 

The Florida market provides an interesting case study for the following reasons:

• Large, growing population - with an estimated population of 21 million people in 2017, Florida is the 3rd most populous state and the 5th fastest-growing in the U.S. 
• High concentration of dermatologists - Florida has a higher than average number of dermatologists on a per capita basis, with 8.0% of the dermatologists and 6.4% of the population in the U.S.
• High penetration by private equity - According to a recent article published by the law firm McGuireWoods LLP, "Dermatology remains highly fragmented...with roughly only 5% of the industry currently consolidated." By contrast, Cobble Hill Group estimates that approximately 21% of dermatologists in Florida are now affiliated with a private equity backed company. 

​
The interactive map below shows the Florida office locations for eight dermatology companies that currently have or previously had private equity investors. We also included Integrated Dermatology's offices on the map; although it does not have a private equity investor, it is one of the most active acquirers of dermatology practices in the U.S. Phynet Dermatology is owned by a private equity group and has ties to Florida but we were not able to identify any office locations in the state.

The Cobble Hill Group provides M&A and valuation services to physician practices. For information about our firm or data for other states, please contact us at [email protected].

​​Below is information regarding each company on the map. It is interesting to note that eight of the ten, including two with offices across the U.S., have their headquarters in Florida.

​Owner - Harvest Partners
Date Acquired / Invested - May 2016 (acquired from Audax Private Equity, which invested in 2012)
Headquarters - Maitland, FL (near Orlando)
Florida Offices - strong positions in several markets including Orlando, Tampa, Miami, and the Atlantic coast north of Vero Beach
Website - https://www.advancedderm.com/
Locations - AZ, CA, CO, FL, GA, MD, MI, NV, OH, PA, RI, SC, TX, VA, WY

​Owner - Tyree & D'Angelo Partners
Date Acquired / Invested - December 2015
Headquarters - Tampa, FL
Florida Offices - strong position in Tampa but has fewer offices in the region than ADCS
Website - http://www.dermmedpartners.com/
Locations - FL (website mentions 14 other states but no specific locations)

​Owner - Unknown
Date Acquired / Invested - 2015 (acquired or reacquired from Cressey & Co., which invested in 2013)
Headquarters - Panama City, FL
Florida Offices - dominates the Panhandle region
Website - https://dermsolutionsgroup.com/
Locations - AL, FL, GA, MS

​Owner - Gemini Investors
Date Acquired / Invested - July 2017
Headquarters - Hollywood, FL
Florida Offices - strong position across Greater Miami metropolitan area; also has offices in Boca Raton and the Florida Keys
Website - https://www.dermcaremgt.com/
Locations - FL

​Owner - OMERS Private Markets (Ontario Municipal Employees Retirement System​)
Date Acquired / Invested - February 2016 (acquired from Varsity Healthcare Partners, which invested in 2014)
Headquarters - Manitowoc, WI
Florida Offices - strong position in the Panhandle region
Website - https://forefrontdermatology.com/
Locations - AL, DC, FL, IL, IN, IA, KY, MD, MI, MN, MO, NC, OH, PA, VA, and WI

​Owner - Jeff Queen and possibly others (no private equity ownership)
Date Acquired / Invested - n.a.
Headquarters - Boca Raton, FL
Florida Offices - strong position in Boca Raton area
Website - https://www.mydermgroup.com/
Locations - AZ, CA, CO, DC, FL, IL, IN, LA, MD, NC, NV, OH, VA, Other (according to a press release, IDG provides care in 28 states)

​Owner - Century Equity Partners
Date Acquired / Invested - 2017
Headquarters - Nashville, TN
Florida Offices - We could not find a website for PhyNet nor a list of office locations. According to LinkedIn.com, PhyNet's Chairman of the Board and its Regional Director of Development-Florida are based in Florida. PhyNet Dermatology LLC is registered as a foreign limited liability company in Florida.
Website - http://cepfunds.com/portfolio/phynet-dermatology/
Locations - We could not find a website for PhyNet nor a list of office locations.

​Owner - GTCR
Date Acquired / Invested - October 2016 (acquired from Prairie Capital)
Headquarters - Fort Myers, FL
Florida Offices - strong position on the Gulf coast between Sarasota and Naples
Website - http://www.riverchasedermatology.com/
Locations - FL

​Owner - Susquehanna Private Capital​
Date Acquired / Invested - March 2018
Headquarters - Miami, FL
Florida Offices - strong position on the Atlantic coast from Jupiter south to Miami; also has offices in Tallahassee, Jacksonville and Key Largo
Website - http://www.scacce.com/
Locations - FL

​Owner - Gryphon Investors
Date Acquired / Invested - June 2018
Headquarters - Palm Bay, FL
Florida Offices - strong position on the Atlantic coast south of Vero Beach to West Palm Beach and various markets in central Florida
Website - https://www.wederm.com/
Locations - FL

On the surface, it may be difficult to differentiate among these dermatology companies. However, they vary widely in strategy, structure and culture. The private equity firms buying medical practices also vary in size, industry focus, and investment strategy. In future blog posts, we may explore some of these differences.​

The Cobble Hill Group LLC has been retained by a packaged food manufacturer to identify add-on acquisition opportunities in the southeast U.S. Ideal acquisition candidate would be regional or niche brand with revenue of $2 million to $8 million that would benefit from the purchasing, manufacturing, marketing, and distribution capabilities of a larger company.

Will consider most food categories, with particular interest in the following:

• Baking mixes
• Cereals and granola
• Jams and jellies
• Sauces, dressings, marinades
• Spices, seasonings, salsas, relishes
• Snack foods 

Not interested in the following categories:

• Dairy
• Meat
• Fresh produce

Financials:

• Target revenue range:  $0.5 million - $10.0 million
• Target EBITDA range:  up to $2.0 million

Geographic Focus

• South Atlantic:  DE, DC, FL, GA, MD, NC, SC, VA, WV,
• East South Central:  AL, KY, MS, TN
• West South Central:  LA

For more information or to discuss specific opportunities, please contact Barry A. Baker at 877.814.4115 or through LinkedIn,  

Last week, Bain Company, Inc. published its Global Private Equity Report 2018. The report focused on answering the question: "In such a frothy environment, how can funds generate the attractive returns their limited partners expect?"

Bain highlighted retail healthcare as a "fragmented, high-margin sector with strong growth characteristics" that "still offers targets at reasonable multiples and many opportunities to unlock substantial value."
​
According to Bain, from 2012 to 2017, the number of M&A deals in retail healthcare increased at a compounded annual rate of 34%. Nevertheless, sectors such as dermatology and dental remain highly fragmented, with the top 10 companies in each sector accounting for less than than 5% of the total market. Provided below is Figure 1.24 from the Bain report:

​
​​The Bain report also provided a high-level view of how PE funds can build value in the sector. According to Bain's report:

"The best playbooks deploy a combination of retail and healthcare best practices. Retail investors bring expertise in real estate management, site selection, branding and marketing. They use a consumer mindset to home in on target customers and best meet their needs. Healthcare specialists tend to attack the operations side of the business by improving clinical workflow, optimizing billing practices and improving negotiating power with payers and suppliers. The ability to run plays from both directions can be a meaningful advantage in assessing and realizing potential."

Of course, the challenge in executing this value creation strategy is to simultaneously maintain high levels for each of the following:

• Financial performance including profitability, stability and growth;
• Clinician experience including peer group, work environment, and opportunities for professional growth; and
• Patient experience including quality of care and improved outcomes.

To further complicate this balancing act, it must be accomplished within an ever-changing regulatory and reimbursement framework.

The drivers for consolidation are the trend toward value-based medicine, the attractive economics of the retail healthcare sector, the perceived advantages of greater scale, and the immense amount of private equity chasing attractive investment opportunities.

We can debate the extent to which consolidation will occur in physician practice management and other sectors of retail healthcare. We can also debate the implications of consolidation. However, it is no longer worthwhile to debate whether consolidation will occur; it has already arrived and is gaining momentum. In a previous blog post, we noted that since 2012, more than 20 private equity groups have acquired dermatology practices.

​Questions or comments? Please leave a reply below or feel free to contact Barry A. Baker at 877.814.4115.

Related Blog Posts:
Dermatology Practice Consolidation and Private Equity in Florida
Private Equity and Consolidation in Dermatology

In recent years, M&A activity in the fire protection industry has increased dramatically. Private equity groups have been the most active acquirers, seeking to consolidate this highly fragmented industry.

We have been researching the industry to identify potential platform and add-on (or tuck-in) acquisitions. We started with a "raw" industry universe of several thousand companies, which we have been screening  to find the best prospects for acquisition. As our screening progresses, we append and refine the information for each remaining company including size, ownership, geographic focus, and product/service mix. Our approach combines commercial databases, open source databases, proprietary analytical and statistical techniques, and painstaking manual research.

Below is a list of several large companies that were acquired in 2017. If you would like to obtain more information about our dataset, please click on the link below the list.

Owner - Minimax Viking GmbH, whose majority owners are Kirkbi A/S and Intermediate Capital Group plc.
Date Acquired -​ June 2007
Headquarters - Irvine, CA
Website - http://www.cfpfire.com/
Services - 
​Fire Sprinkler Systems
Suppression Systems: Special Hazard Fire, Dry Chemical Fire, Gaseous Fire, and Foam Fire
Restaurant Kitchen Hood Systems
Fire Extinguishers
Alarm & Detection
Design & Installation
Service and Inspection

​Owner - Audax Private Equity
Date Acquired -​ April 2017
Headquarters - Lynbrook, NY
Website - https://www.academyfire.com/
Services -
​Fire extinguishers
Emergency & Exit Lighting
Fire Sprinklers
Fire Alarm
Backflow
Kitchen Fire Suppression
Monitoring
Barrier Risk Management

​Owner - Blue Point Capital
Date Acquired -​ February 2017
Headquarters - Richmond, VA
Website - http://www.flsamerica.com/
Services - ​
Inspections
Service and Repair
Alarm & Special Hazards Installation
Sprinkler Installation
Fire Alarm Monitoring

​Owner - CHA Consulting Inc / Long Point Capital
​Date Acquired -​ January 2017
​Headquarters - Birmingham, AL
Website - http://www.americanfireprotectioninc.com/
Services -
Fire Suppression
Special Hazards
Fire Alarms
​Inspection, Testing, and Maintenance

Interested in learning about other companies in the industry? We are providing a subset of our list for FREE so you can get a sense of the companies that are included.

We have not appended size and ownership data to the FREE list but it is fully searchable by name, location, keyword, etc. We welcome questions and feedback in the comment section.

​Click here to register and obtain FREE access to a subset of our database.

Find Venture Debt LLC, an affiliate of Cobble Hill Group, recently launched a fast and easy solution for technology and growth companies to identify and connect with potential lenders. Their broad universe of lenders goes beyond the "most likely suspects" and their filtering algorithm helps select the loan types and lenders that are the best fit. Find Venture Debt helps companies accelerate growth and minimize dilution by providing access to 150+ lenders for the following types of debt:

• Working capital financing;
• MRR lines of credit,;
• Senior term loans;
• Second lien term loans;
• Revenue-based financing;
• Mezzanine financing;
• Equipment loans;
• Equipment leasing;
• Royalty-based financing; and
• Royalty sales.

Find Venture Debt helps technology and growth companies:

• Learn about the venture debt market;
• Determine if they qualify for a loan; and
• Connect with lenders.

Find Venture Debt helps venture debt lenders:

• Increase the size of the market by creating greater awareness among potential borrowers;
• Build their brand recognition, especially if they are not market leaders; and
• Connect with potential borrowers.

For more information, please visit www.findventuredebt.com or contact Barry A. Baker, CFA directly at [email protected], at 877.814.4115, or through LinkedIn.

Since 2012, more than 20 private equity groups have acquired dermatology practices. Their initial investments are usually large, multi-office practices often referred to as "platform" or "portfolio" companies. Subsequently, many of these portfolio companies have been acquiring smaller practices to expand their geographic footprint and/or range of services offered. These transactions are often referred to as "add-on" or "tuck-in" acquisitions.

Consolidation in dermatology is accelerating, with more than 35 practices acquired during the first nine months of 2017. This map shows the number of private equity portfolio companies that own at least one dermatology practice by state. The darker the shade of blue, the more private equity portfolio companies active in the state.

Note: One of the most active acquirers of dermatology practices is not backed by a PE firm. We have included it in the map due to its large size and broad geographic footprint.

Related Blog Posts:
Dermatology Practice Consolidation and Private Equity in Florida
Consolidation in Retail Healthcare...We've Only Just Begun

Welcome to our first blog post.  To give you a flavor of the work we do, here is a list of our active and recently completed projects:

Buy-Side Acquisition Searches:
- Logistics Services
- Market Research Services
- Fire Protection and Safety Services
- Educational Child Care Centers
- Online and Blended Learning

M&A Advisory:
- Dermatology Practice (Sell-Side)
- Law Firm (Partner Buy-In)
- Healthcare IT (Represented Chinese Investor)

Valuation:
- Healthcare IT
- Medical Devices
- Biopharmaceuticals
- Big Data Marketplace
- Media Analytics Software
- B2C E-Commerce
- Mechanical & Electrical Contracting
- Agricultural Chemicals