Paragon Ventures Healthcare Mergers and Acquisitions Market Concentrix

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CONCENTRIX REPORT

We explore the relationship between buyers and sellers to consummate transactions within specific healthcare sectors. The Paragon Concentrix Ratings are designed to provide an easy reference of the supply and demand for each niche business segment. It monitors and balances current buyer appetite with seller interest and the strength of market valuation.

Concentrix ratings and market maker categories are based on trends of actual transactions closed within the past 18 months, public and private acquisition profiles and interviews conducted by Paragon Ventures across the spectrum of buyers. Many subjective and objective factors are used to influence our Concentrix ratings including revenue size and profitability levels of each enterprise. Valuation ratings are a blend of strategic and financial sponsor valuation criteria. A five year rolling average is used to determine relative strengths and weakness in the current market.

The Current State Of

The Healthcare M&A Market

Q1 2010 Update

· This market Concentrix report finds many sectors continuing to be in strong demand despite the global economic turmoil. Private equity driving interest in privately held, mid-market businesses with strong earnings and sustainable revenue streams. Despite the public markets and general economy there is strong interest and transactions are closing. It is important to understand the process needed to consummate a transaction to achieve maximum shareholder value.

· Strong local and regional players (in most every niche) continue to position themselves for growth and expansion.

· Product line expansion, synergistic and opportunistic investors continue to drive deal flow. Concurrently, the private equity activity continues to increase investment throughout the healthcare sector.

· Private equity investors continue to expand their investments though acquisition of select niche healthcare providers.


Sector	Concentrix Rating Information
Healthcare IT Services	Healthcare IT Services - Very strong market with growing buyer pool from both strategic buyers and private equity investors. Premium valuations being paid for larger well established, profitable companies that drive efficiencies with proprietary products and services. Trend continues to gain momentum based on companies ability to manage enterprise customers and drive cost out of the healthcare system.. Paragon Buy/Sell Concentrix rating: B9/S8 - Valuations: V9 Current Market Makers: National strategic buyers - Strategic private equity firms for both platform opportunities and add-on acquisitions - - Buyers seeking diversification along verticals
Healthcare Staffing	Healthcare Staffing - Very strong market with growing buyer pool. Premium valuations being paid for larger well established, profitable companies with 15%+ EBITDA and strong contractual relationships. Paragon Buy/Sell Concentrix rating: B9/S8 - Valuations: V9 Current Market Makers: National strategic buyers - Strategic private equity firms for both platform opportunities and add-on acquisitions
Home Healthcare - Nursing Services	Home healthcare/nursing - Continued consolidation upswing with many buyers looking for critical mass in key markets. A highly fragmented sector with many consolidation opportunities. Many buyers keying on the strong growth trends and the ability to realize significant cost savings with buyer synergies and integration... leading to improved profitability. Paragon Buy/Sell Concentrix rating: B8/S7 - Valuations: V7 Current Market Makers: National strategic buyers - Regional strategic buyers - Critical mass investors
Infusion Therapy Pharmacy	Infusion pharmacy - Very strong market with growing buyer pool and numerous consolidation opportunities. Premium valuations being paid for larger well established, profitable companies with 15%+ EBITDA, annual growth and diversified therapies. Trend continues to gain momentum based on growth of the infusion market, convergence of infusables and increased utilization of pharmaceuticals. Paragon Buy/Sell Concentrix rating: B9/S8 - Valuations: V9 Current Market Makers: National strategic buyers - Strategic private equity firms for both platform opportunities and add-on acquisitions - - Buyers seeking diversification
Institutional Pharmacy and Support Services	Institutional pharmacy and support services - Very strong market with growing buyer pool. Continuing consolidation as buyers looking to expand geographic coverage. Acquisitions providing strong economies of scale with consolidated back office and integrated buying power. Paragon Buy/Sell Concentrix rating: B9/S8 - Valuations: V9 Current Market Makers: National strategic buyers - Strategic private equity firms for both platform opportunities and add-on acquisitions - - Buyers seeking diversification into long term care sector from synergistic vantage points.
Hospice Services	Hospice - Strong interest from both public and private equity looking to expand market share. Paragon Buy/Sell Concentrix rating: B9/S9 - Valuations: V7 Current Market Makers: National strategic buyers - Regional strategic buyers - Critical mass investors
Medical Device	Medical Device - Cost efficient, proprietary devices with strong national and international presence are driving demand from both vertically integrated strategic buyers and private equity. Paragon Buy/Sell Concentrix rating: B8/S7 - Valuations: V7 Current Market Makers: Strategic buyers looking for both diversification and cost reduction plays across sectors - Strong international interest for manufacturing efficiencies.
Medical Asset Management	Medical Asset Management - Paragon Buy/Sell Concentrix rating: B8/S7 - Valuations: V7 Current Market Makers: Private Equity Firms - National strategic buyers - Regional strategic buyers - Individual investors
Medical Equipment Distribution (HME)	HME - Larger, multi-location retail operations in demand. Stronger valuations for those businesses with strong retail, private pay and non-Medicare payor mixes. Valuations adjusted for reimbursement changes. This continues to be a highly fragmented sector with many consolidation opportunities for business owners with realistic valuation expectations from the current market. Paragon Buy/Sell Concentrix rating: B4/S8 - Valuations: V4 Current Market Makers: A few strategic national buyers - Local/Regional strategic buyers - value investors - - Buyers seeking diversification, demographic and critical mass investors.
Medical Supply and Product Distribution Mail Order	Medical Supplies - Consolidation opportunities continue as buyers look to increasing critical mass and lower cost of patient acquisition. Diabetic, Incontinence, Urologicals, Enteral - Strong market and premium valuations. Diversified payor mix. Growing buyer universe. Mail order and alternative distribution models highly desirable. Paragon Buy/Sell Concentrix rating: B8/S8 - Valuations: V8 Current Market Makers: Multiple strategic national buyers - local/regional strategic buyers - national distribution companies - strategic private equity firms - value investors - - Buyers seeking diversification and critical mass investors
Respiratory Care Products and Services	Respiratory - Local and regional buyers (along with private equity firms for larger opportunities) has filled the gaps in many markets. Valuations are slightly depressed based on the impact of reimbursement changes on earnings. Diversity of payors i.e. specifically non-Medicare payors, has supported premium valuations, especially in key geographies. Interest continues to be driven by demographics. Paragon Buy/Sell Concentrix rating: B4/S7 - Valuations: V5 Current Market Makers: A few strategic national buyers - Local/Regional strategic buyers - Geographic expansion and competitive position, demographic and critical mass buyers. Individuals and family trusts also interested in smaller sub $10M opportunities for retiring business owners.
Revenue Cycle Management	Revenue Cycle Management - Efficient, profitable and growing businesses are in strong demand. Those business models that drive cost out of the system and provide synergies and efficiencies with minimal touch receiving highest valuations. Paragon Buy/Sell Concentrix rating: B9/S6 - Valuations: V9 Current Market Makers: Private equity and strategic buyers
Sleep Diagnostics - Sleep Labs and Sleep Products	Sleep Diagnostics - Strong market for established sleep labs with turn-key operations. A highly fragmented sector with many consolidation opportunities - Many buyers looking in key markets. Valuations have improved with the entrance of a number of private equity players who are using diversified platforms to enter the sleep market. Paragon Buy/Sell Concentrix rating: B8/S7 - Valuations: V7 Current Market Makers: Private Equity Firms - National strategic buyers - Regional strategic buyers - Individual investors

The market for healthcare companies, not unlike the economy of our great Nation, has always been cyclical. The factors that influence the flow of investment and divestiture is as broad as the diversity of companies serving the healthcare needs in America.

Buyers buy and sellers sell - often for different reasons. The key to success in any business endeavor is a realistic strategic plan and executing that plan to fulfill specific goals. Every business, sooner or later, will either be sold, merged, bequeathed or closed. Therefore, every strategic plan should always include an exit strategy that takes full advantage of market dynamics and positions the company for premium valuation. With that said, let's take a birds-eye view of the current market and examine factors influencing buyers acquisitions and sellers divestiture or merger of their enterprises.

The healthcare market is a very broad category and needs to be viewed in the context of the specific niche sector businesses. To understand the dynamics of the healthcare market we first need to understand the players.

Buyers

Buyers generally fall into several specific categories:

National Strategic buyers - These buyers own similar businesses with numerous locations serving multiple states (national) and are looking to expand geographically or to add depth within an existing geography, or to expand into new product lines.
Local/Regional Strategic Buyers - These buyers own similar businesses with one or more locations/markets and are looking to expand geographically, or to add depth within an existing geography, or to expand into new product lines
Strategic Private Equity Firms - These investors (Click here to read the article, New Titans of Wall Street) invest funds from various private sources (academic, institutional, high net worth individuals) coupled with various forms of mezzanine and other forms of debt. Transactions with strategic private equity firms provides several unique opportunities/benefits which differ from standard strategic acquirers.
Value Buyers - These investors focus primarily on the economic dynamics of the acquisition candidate. The value buyers will focus on using primarily debt financing to fund the transaction while preserving cash.

Buyers are buying in an effort to:

Realize superior returns on investment
Gain strategic market position and obtain critical mass
Procure market opportunities
Diversify product lines and/or payor mix

Sellers

As a seller, you want to make certain that the marketing of your company comes on a timeline that you have carefully planned and prepared for in advance of the actual event.

Sellers are considering selling today because of various reasons including:

Premium valuation opportunities in the current market
Retirement
Business growth demands requiring expanded expertise and capital

Fear of the future should never be the primary factor that forces you to sell your business before the company and the market are ready. Proper pre-planning, skillful exit strategy execution and consulting with an industry M&A expert are critical to success in any market.

For more information on our State of the Market report and Concentrix ratings, please contact Paragon Ventures

800-719-1555.

Paragon Ventures is one of the nation's leading specialists in the merger, acquisition and divestiture of private mid-market companies. As an intermediary with experience and expertise we can facilitate the entire process of buying or selling a business. We specialize in the health care industries including all aspects of the home healthcare, respiratory care, infusion therapies, nursing services, medical manufacturing, distribution and related medical technologies.

Paragon Ventures follows a proven process for success where we can consistently and reliably perform. Our mission is to Unlock the Value, Create Opportunity and Achieve Results. Paragon Ventures best serves established, profitable, mid-market companies who are looking to either acquire synergistic organizations or execute an exit strategy.

Whether you are looking at purchasing a business or trying to sell your own company, we are committed to facilitating the process from beginning to end.

Paragon Ventures' extensive transactional experience throughout the healthcare industry including:

Respiratory Care	Institutional Pharmacies
Infusion Therapies	Mail Order Pharmacies
Disease State Management	Medical Manufacturing
Diabetic Supply	Medical Devices
Medical Distribution	Outpatient Rehabilitation
Durable Medical Equipment	Retail Pharmacies
Healthcare Staffing	Specialty Pharmacy
Home Health Care	Wound Care
Sleep Diagnostics / Labs	Long Term Care Services

We have developed the effective strategies, proven processes and extensive buyer relationships which deliver the maximum Real Value® for our clients during the sale or merger of their company.

Our client reference list is available upon request, please call 800-719-1555.

It's All About Value

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If you are interested in new growth opportunities, consolidation or selling your existing business, feel free to call one of the Paragon Ventures™ partners directly with any questions you may have or complete our on-line inquiry form.

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