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Durable Medical Equipment EBITDA Multiples: AdaptHealth's Acquisition of AeroCare

On December 1st, AdaptHealth announced it was purchasing AeroCare Holdings, Inc. for total consideration of $2b, consisting of ~$1.1 in cash and 31 million common shares valued at $926m as of November 30, 2020. Founded in 2000, AeroCare provides direct-to-patient respiratory and home medical equipment (“HME”) including CPAP and BiPAP machines, oxygen concentrators, home ventilators, and other durable medical equipment products. According to the financial information included in the equity offering issued in connection with the deal, Aerocare generated revenue and adjusted EBITDA of $652m and $165.2m in the LTM ended September 30, 2020, implying a trailing multiple of 12.3x EBITDA. AdaptHealth also published an investor presentation indicating that AeroCare's estimated pre-synergy EBITDA is expected to be ~$230m in 2021 prior to patient care capex, which works out to a deal multiple of ~8.8x. Much of the growth is due to the pro forma impact of several recent AeroCare acquisitions. Patient care capex is expected to be approximately $115m, implying a much higher 17.6x EBITDA less patient capex multiple.

The AeroCare deal is the largest DME transaction in our database in terms of EBITDA, and the 12.3x multiple is in line with the size-based regression. The 8.8x forward multiple is on the low end of the range, which is partially due to the fact that it is a forward multiple, but also may be related to the significant patient capex figures that have been excluded from AeroCare's reported EBITDA numbers. The 17.6x EBITDA less patient capex multiple would represent the highest reported in the database.

While we believe that the majority of the EBITDA figures in the database are reported prior to patient care capex, it can be difficult to tell from public data. Some of the reported transactions may include these costs reported as an expense, while others may only have minimal expenses of this nature, naturally leading to higher reported multiples.


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