Private equity interest in gastroenterology began in 2016 with Audax Group’s formation of Gastro Health. In the years following, eleven additional private equity backed GI platforms have been formed across the nation. These platforms (such as OneGI, GastroHealth, GI Alliance, and Physicians Endoscopy, to name a few) have engaged in aggressive M&A strategies over the past five years, acquiring GI practices in an attempt to establish regional dominance and leverage economies of scale.
Despite a general slowdown in the M&A market in early to mid 2023, the gastroenterology space continues to be a target of interest for private equity. Similar to activity seen in the dermatology and eye care space, the GI market has begun to see the maturation of existing platforms. As a result, each platform’s strategy is beginning to become more defined. Although integration can be a challenge for all platforms, platforms that have prioritized clinical autonomy and physician-led governance structures have seen the most success.
Over the past few years, GI platforms have experienced meaningful success in executing their growth strategies, driving platform wide growth in profitability and income repair for partner physicians. Additionally, as private equity firms typically hold investments for a period of three to five years, several PE-backed GI platforms have experienced a second sale recapitalization including GastroHealth, The GI Alliance, and United Digestive. We expect several other pe-backed platforms to experience a “second bite” in the near term, as well.
Although some platforms nearing the end of their holding period have begun to emphasize organic growth and integration, the majority of platforms have begun to focus on building current market density, resulting in heavy M&A activity. As platform ownership has changed hands in the past year and new private equity funds have entered the fold, there has been a major infusion of new capital into the marketplace. This means there is ample dry powder in the space and heavy competition to continue to acquire existing practices.
In addition to the increased competition from an investor perspective, tailwinds exist from a basic supply of clinical treatment standpoint, with common GI procedures such as colonoscopies, endoscopy exams, polypectomies, and hemorrhoid treatments now being delivered in the outpatient setting. As in other specialties such as eye care, musculoskeletal care and skin care, to name a few, patients generally prefer to receive care in the outpatient setting, and the demand for outpatient services is expected to continue growing year over year.
Overall, the market outlook in the GI space remains strong and private equity partnerships continue to be an attractive option for physician owners looking to achieve their goals and succession plans. Although some markets have become consolidated, there are still many areas of the country where GI practices have not been touched by private equity. This ample whitespace in gastroenterology and the large amount of dry powder in the market will continue to drive acquisitions and the formation of new GI platforms in the near future.
When evaluating a potential private equity partner, it is critical to consider cultural fit, as well as value, as strategy differs highly from platform to platform. Key aspects such as clinical autonomy, integration, management fees, and governance must be considered to ensure a strong go-forward partnership.
| Date | Target | Platform | PE Sponsor | State |
| August 2023 | Blair Gastroenterology Associates | US Digestive Health | Amulet Capital Partners | PA |
| June 2023 | Digestive Health Center | GI Alliance | Apollo Investors/Physician Owned | MS |
| June 2023 | Digestive Health Consultants | GI Alliance | Apollo Investors/Physician Owned | WA |
| May 2023 | Gastroenterology Associates of Tidewater | One GI | Webster Equity Partners | VA |
| May 2023 | Specialists in Gastroenterology | GI Alliance | Apollo Investors/Physician Owned | MO |
| April 2023 | TransSouth | One GI | Webster Equity Partners | TN |
| April 2023 | Palm Beach Digestive Associates | Medical Specialists of the Palm Beaches | Ascend Capital Partners | FL |
| March 2023 | United Digestive | Kohlberg & Company | Kohlberg & Company | GA |
| February 2023 | Gastroenterology Group of Naples | United Digestive | Frazier Healthcare Partners | FL |
| January 2023 | Connecticut GI | GI Alliance | Apollo Investors/Physician Owned | CT |
| January 2023 | Gastroenterology Associates, PC | One GI | Webster Equity Partners | VA |
| January 2023 | InSite Digestive Health | Unio Health Partners | Triton Pacific | CA |
| January 2023 | Gastroenterology Associates | Gastro Health | Apollo Investors/Physician Owned | WA |
| January 2023 | Skyline Gastroenterology and Endoscopy | One GI | Webster Equity Partners | KY |
Physician Growth Partners (PGP) is a transaction advisory firm working exclusively with independent physician groups in transactions with private equity.
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