4 trends to know about private equity in gastroenterology — Multiples, market potential & more

High gastroenterology private equity activity will continue in 2019, according to Kerri Zelensek, McGuireWoods associate, and Tom Zahn, partner at McGuireWoods. Mr. Zahn and Ms. Zelensek attended the 6th Annual Healthcare and Life Sciences Private Equity and Finance Conference, February 20 and 21 in Chicago, and outlined the key takeaways on JDSupra.

The key trends to know:

1. Gastroenterology is a fragmented market, which may impact private equity opportunities. Gastroenterologists are accustomed to working independently, making combinations and add-ons challenging.

2. Gastroenterology multiples vary due to differences in infrastructure and practice sophistication. Multiples will likely be lower for add-in deals and for practices without an established infrastructure. Conference panelists said they've seen multiples in the low teens or high single digits for practices with a strong internal structure.

3. Commercializing gastroenterology ancillaries is key in gastroenterology. Structured ancillaries can form lucrative investments and benefit physicians' practices.

4. Before a practice comes to market, there should be an agreed-upon, transparent formula for physician compensation.

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