Private equity investor Joe DeLuca shared his thoughts with Gastroenterology & Endoscopy News on why the gastroenterology space is ripe for private equity investment.
Here's what you should know:
1. Mr. DeLuca feels population dynamics will favor gastroenterology in the immediate future. He said despite legislative interference, "the demographics are irresistible."
2. He said GI practices share similar characteristics to booming private equity-backed dermatology and dentistry practices that he thinks will be attractive to investors.
3. GI spending is is increasing at a faster rate in the outpatient space, than in the inpatient space, according to Mr. DeLuca. Although regulation exists in the industry, Mr. DeLuca feels it may not hit outpatient facilities "as hard" because they're "cheaper to implement."
4. While private equity is still relatively new to the GI space, "it feels like an industry gearing up." He cited the partnership between Miami-based Gastro Health and private equity firm Audax as one such example.
5. Private equity firms are looking for GI groups running efficient outpatient facilities that could merge with another practice easily. He said private equity investment often leads to increased growth. While organically growing a practice can take between five to 10 years, with investors expansion can take place within a year.
6. Mr. DeLuca said private equity investment does carry some risk. He fears if the industry becomes "disoriented by the private equity need for growth and profit," … "[Practices could] lose focus on the opportunity to design and create a stronger, more capable and effective independent physician practice model for the next generation of gastroenterologists."