U.S. Physical Therapy, Inc. (NYSE: USPH), a national operator of outpatient physical therapy clinics, announced that it has signed an agreement to purchase a 50% equity interest in Metro MSO, LLC for $76.5 million, $75 million of which will be funded by its cash on hand and the remaining $1.5 million through the issuance of common stock. Metro MSO manages 50 outpatient clinics, the majority of which are in New York, with plans to further expand in New York and adjacent states. The Metro MSO-managed clinics deliver physical, occupational and speech therapy and also provide physical therapy services to patients in their homes.
Metro is presumably structured as an MSO due to corporate practice of medicine regulations in New York.
Physical Therapy M&A Deal Volume
Following years of increasing private equity involvement in the segment dating back to 1995, the number of announced physical therapy M&A transactions has fallen off a cliff in recent quarters following the late 2021 peak.
The decline in total volume corresponds with non-existent PE platform buyout activity, as a grand total of zero platform buyouts have been announced so far in 2024. That may change in the near future as Grant Avenue's H2Health, which is the result of the 2019 merger of Heartland Rehabilitation and health staffing company Milestone, is reportedly exploring a sale marketed based on $25 to 30 million EBITDA. Milestone is reportedly non-core to H2's business at this point, and is in the process of being wound down, making it a pure-play physical therapy provider.
Physical Therapy EBITDA Multiples
According to the press release issued by USPH, Metro MSO currently generates approximately $64.0 million in annual revenue and approximately $12.0 million in annual EBITDA on a consolidated basis, implying enterprise multiples of 2.4x revenue and 12.8x EBITDA (using a $153 million EV). The implied EBITDA multiple is in line with historical physical therapy transactions of similar size.
While the implied multiple is in line with the precedents, this represents a decline from the 14x to 16x multiples reported in the 2019-2021 timeframe. It is also nearly identical to the 12.5x multiple reported from the MOTION PT / Confluent deal in early 2023.
Other Physical Therapy Deals
Read Scope Research's take on other physical therapy M&A transactions:
MOTION PT acquired by Confluent Health
About Scope Research
The Scope Research Healthcare M&A Valuation Database currently has financial details for 59 physical therapy deals going back to 2010, 22 of which include reported EBITDA multiples. The physical therapy data can be purchased individually, while our affordable annual subscriptions provide access to all of our healthcare M&A databases and segments, updated continuously.
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