Private equity firm The Vistria Group has recapitalized / acquired / made a strategic investment in Soliant in a deal that implies an enterprise value of roughly $2.5 billion. The deal was announced about four years after middle market buyout fund Olympus Partners bought the business for $612 million from Adecco Group (~11x EBITDA at that time). Soliant is a provider of healthcare staffing services, connecting professionals such as nurses, therapists, psychologists and educators with hospitals and schools. Massive growth in Soliant's educational staffing segment (K-12) has overshadowed recent struggles in the travel nursing segment (hospitals). It now serves over 3,000 school districts and more than 700 hospitals across the United States.
According to press reporting, Soliant expanded its sales and recruiting team by over 700 people during Olympus’ ownership and increased EBITDA by more than five times.
Healthcare Staffing M&A Deal Volume
Healthcare staffing M&A, perhaps more than any other healthcare niche, experienced a massive boom during the pandemic corresponding with staffing shortages across the industry and corresponding surges in rates and placements. Announced M&A volumes fell of a cliff (normalized?) in 2023, but are showing signs of a rebound. It's also important to note that the boom/bust primarily occurred in the traditional staffing and travel nursing segment, while the broader "specialty services" staffing category has remained relatively steady from an announced deal volume perspective.
Major acquirers in the specialty services staffing category include radiation physics provider Apex, vascular access and infusion nurse staffing provider Dynamic, and pediatric home therapy staffing provider InHome Therapy. The general staffing and travel nursing category has mostly been dominated by current / formerly publicly-traded firms Aya, AMN, and Cross Country, but there are several large sponsor-backed platforms as well.
Healthcare Staffing EBITDA Multiples
According to Moody's, the Soliant deal is financed with $1.49 billion of debt at 5.7x leverage, which implies EBITDA of $261 million and a deal multiple of 9.6x, about five times Soliant's 2019 EBITDA of $54 million to tie things back to the current press reporting. Also according to the Moody's report:
Under the previous private equity owner and following the 2019 separation from Adecco Group AG, the company more than doubled its revenue scale. Moody's expects over $1 billion of revenue in 2024, compared to $392 million in 2020.
The relatively low multiple compared to other large healthcare staffing precedents deals is a little surprising given the steady growth of the much larger educational segment, and may hint at some regulatory risk for a business that is heavily supported by federal and state regulations... or maybe the margins are unsustainable... or maybe the hospital segment is just that unattractive...
According to a very thorough S&P Global report:
Our ratings on Soliant continues to reflect our expectation that its education segment will continue to fuel growth, offsetting decline in health care segment. Soliant's education segment, which provides specialized health care professionals (including special education teachers, occupational therapists, nurses, speech language pathologists, and school psychologists) to kindergarten through 12th-grade (K-12) public and charter schools, accounts for about 75% of revenue and 80% of EBITDA. This segment experienced strong growth over past three years helped by an increased number of clients, services provided to clients, and low- mid-single digit rate increases. Soliant's providers typically provide services in midsize suburban and rural school districts that struggle to meet the increasing demand for specialized teachers. The business is supported by federal and state regulations requiring the availability of these services and related funding made available for special education. The company also offers to manage the full needs of a school or school district's special education professionals as a managed service provider (MSP; called Blazerworks) and its proprietary teletherapy platform (VocoVision, which accounted for 23% of education segment revenue for fiscal 2023).
The company has been investing heavily in sales and recruitment including about a 45% increase in the number of producers since 2021. We expect the company to continue to invest in sales and recruitment in the education segment as part of its growth strategy. This segment offers good revenue visibility, as contracts rarely change during the school year. While Soliant has a leading position in this very fragmented industry, we believe competition for both candidates and for contracts with schools is intense, and barriers to competition are relatively low.
Soliant's health care segment, which accounts for about 20% of its EBITDA, places specialized high-bill-rate nurses and allied health professionals in hospitals and other health care settings, often in less-populated areas. Both the bill rates and volume of demand for contract staff in this segment have been declining rapidly, reversing the increase that occurred during the height of the COVID pandemic. While we expected a significant drop in bill rates, the trajectory of the decline and the decline in utilization (as hospitals increase full-time hires to reduce reliance on contingent labor) was steeper than our expectations. We expect 2024 health care segment revenue to decline by at least 35%-40% and experience margin pressure as we expect pay rates to remain high.
Overall, on a blended basis, we expect mid- to high-single digit revenue growth. Soliant generates strong adjusted EBITDA margins, which is above average relative to other staffing companies peers (averaging about 15%). We expect adjusted EBITDA margin to compress by about 100 basis points (bps) to 200 bps over the next three years as the company looks to expand its education segment to focus on larger school districts, where competition for both labor and contracts with schools is more intense.
Healthcare Staffing EBITDA Multiple Trends
Healthcare staffing multiples have mostly trended upwards slightly over the past ten years, outside of a few smaller travel nursing deals with disclosed financial details that were announced shortly after the post-pandemic peak for bill-rates and demand. Without those two deals, the chart below looks quite different.
Current EBITDA Multiples for Small Healthcare Staffing Firms
Small, subscale healthcare staffing firms typically fetch much lower multiples, if they can even be sold, as heavy owner-operator involvement can be difficult to replicate by buyers. According to data from our active listings database, staffing firms with under $1 million revenue tend to be marketed in the 3-5x range, while firms with $1-10 million are marketed in the 4-7x range.
The following is a summary of a few actively listed healthcare staffing deals from our active listings database:
(links will break over time)
Nationwide Travel Nurse Staffing: Listed for sale at $31.2m, this company is marketed based on estimated revenue and adjusted EBITDA of $30.3m and $5.2m, respectively, implying multiples of 1.04x revenue and 6x EBITDA.
Permanent / Per Diem Medical Staffing in the Midwest: Listed for sale at $20m, this company is marketed based on estimated revenue and adjusted EBITDA of $15.5m and $3m, respectively, implying multiples of 1.3x revenue and 6.7x EBITDA.
Michigan Nurse Staffing: Listed for sale at $5.6m, this company is marketed based on estimated revenue and cash flow of $17.7m and $1.4m, respectively, implying multiples of 0.3x revenue and 4x cash flow.
Texas Nurse Staffing: Listed for sale at $6.05m, this company is marketed based on estimated revenue and cash flow of $6m and $1.9m, respectively, implying multiples of 1.0x revenue and 3.2x cash flow.
LTC Nurse Staffing: Listed for sale at $7m, this company is marketed based on estimated revenue and adjusted EBITDA of $13m and $1.56m, respectively, implying multiples of 0.5x revenue and 4.5x EBITDA.
About Scope Research
The Scope Research Healthcare M&A Valuation Database currently has financial details for 105 healthcare staffing and physician contracting deals going back to 2010, 64 of which include reported EBITDA multiples. The healthcare staffing data can be purchased individually, while our affordable annual subscriptions provide access to all of our healthcare M&A databases and segments, updated continuously.
Don't hesitate to reach out to Will Hamilton at will@scoperesearch.co with questions about your specific situation.