MERGERS & ACQUISITIONS • CAPITAL RAISES • FINANCIAL & STRATEGIC ADVISORY

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HEALTHCARE SERVICES SEGMENT COVERAGE

TRENDS & COMMENTARY

HEALTHCARE SERVICES MARKET UPDATE – FALL 2017

60% of the Time, It Works Every Time

The Affordable Care Act has occupied centerstage of the political theaterfor so long that even its once staunchest critics are growing battle-weary(see Legislative Update). So while the periphery of the Act may eventuallygive way in subsequent legislative sessions, most constituents agree thatthe core of the platform, namely Value Based Care, has enough in it (60%or so) that “works”. As a result, the prevailing investment themes of 2016around increasing quality of care, driving down costs, engaging patients,and managing populations (all the better if achieved via robust dataanalytics) have remained intact throughout 2017.

An Old, Old Wooden Ship Used During the Civil War Era

One undeniable consequence of the ACA is the higher payment burdenplaced on the patient. Whether due to higher deductibles, higher co-pays,or greater scrutiny by commercial payors on out-of-network services, netpatient revenue has been trending flat or slightly down for some time now.Providers and their outsourced servicers alike are thus embracing revenuestream Diversity (properly defined) like never before as a means to drivegrowth and margin expansion. From hospitals acquiring post-acuteservices businesses to diagnostic labs acquiring CROs to payor servicescompanies buying ASCs, the race is on to control the full care continuum inorder to measure performance and demonstrate quality outcomes.

Boy, That Escalated Quickly

Global demographic and regulatory tailwinds continue to drive robustinvestment and consolidation in the pharma services market with outliervaluation multiples seemingly becoming the new normal. FollowingQuintiles merger with IMS Health in 2016 and numerous private CROrecapitalizations in early 2017, the 3rd quarter alone saw four $1BN+transactions hit in rapid succession (see next page). Keep your head on aswivel and expect more of the same as public and private market drypowder looks for a home in 2018.

LEGISLATIVE UPDATE

• American Health Care Act of 2017 (AHCA)

May 2017: Republican Bill (H.R. 1628) toenact partial repeal of ACA / Obamacarepasses the House with a vote of 217-213

• Better Care Reconciliation Act (BCRA)

July 2017: Senate version of the AHCA fails topass 3 times – the original bill plus two saveattempts via compromise amendments

• Graham-Cassidy Amendment to BCRA

Sep 2017: Senate attempt to revive the failedpush in July for at least a partial and dilutedrepeal of the ACA. Ultimately not brought tothe floor for a vote due to a lack ofRepublican support. Appears, therefore,that the ACA will remain intact at leastthrough the calendar year

PROVIDER

S ERVICES

• Revenue Cycle Mgmt.

• Equipment Mgmt.

• Staffing / Recruiting

• Diagnostic Labs

• Emergency Transport

PHARMA

S ERVICES

• Contract Research

• Contract Packaging

• Staffing / Recruiting

• Clinical Trial Supply

• Distribution & Logistics

PRACTICE

MANAGEMENT

• Emergency Medicine

• Anesthesiology

• Radiology

• Ophthalmology

• Dermatology

OUTPATIENT

C ARE

• Surgery Centers

• Rehabilitation

• Behavioral Health

• Diagnostic Imaging

• Onsite Health

This is the first issue of a new HealthcareServices newsletter which will be publishedbiannually, focusing on trends in our coveragesegments as informed by M&A / capitalmarkets activity and legislative developments.

We are excited to announce that we havegrown to 44 professionals across our 4 officesin the U.S. and have completed 72 transactionssince 2014. We recently won the BoutiqueInvestment Bank of the Year award in the U.S.by the M&A Advisor.

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NOTABLE HEALTHCARE SERVICES TRANSACTIONS – 2017

CHILDS HEALTHCARE SERVICES TRANSACTIONS – 2017

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EV/EBITDA

HEALTHCARE SERVICES M&A ACTIVITY AND TRENDS

CHILDS Advisory Partners

EV/EBITDA

M&A VALUATIONS

Sources: Capital IQ and CHILDS proprietary database

QUARTERLY M&A DEAL VOLUME

PUBLIC MARKET VALUATIONS

136

167

227 208 211 219 209

197 208

223

256 262

194 183 174

195 178

149

-

50

100

150

200

250

300

Q1-2013 Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Q2-2016 Q3-2016 Q4-2016 Q1-2017 Q2-2017

Dea

l V

olu

me

9.1x

12.7x

15.7x

13.8x

15.7x

–

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

2013 2014 2015 2016 2017 YTD

13.1x 12.3x

8.1x

13.4x

12.0x 12.3x

7.8x

14.8x

12.7x 13.1x

8.0x

15.3x

13.0x 13.1x

8.2x

15.8x

–

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

Outpatient Care Provider Services Hospitals Pharma Services

Q3-2016 Q4-2016 Q1-2017 Q2-2017

PUBLIC MARKET EV/EBITDA INDEX

PUBLIC MARKET INDEXED STOCK PERFORMANCE

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CHILDS Advisory Partners

HEALTHCARE PUBLIC TRADING STATISTICS

Source: Capital IQ

OUTPATIENT CARE

PROVIDER SERVICES

HOSPITALS

PHARMA SERVICES

Market Data Operating Statistics EV as a Multiple of: Growth

Stock Price LTM LTM FY2019 16 - '17

Company Name 8/31/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA GrowthAverage

Envision Healthcare Corporation $52.41 70.1% $6,250.6 $13,007.6 $6,038.4 $982.6 16.3% 2.15x 13.0x 1.38x 10.5x 118.0% 77.6%

MEDNAX, Inc. 44.85 62.2% 4,154.0 5,875.6 3,337.3 628.4 18.8% 1.76x 9.3x 1.61x 9.6x 7.0% 13.5%

Laboratory Corporation of America Holdings 156.87 95.5% 15,969.4 21,813.3 9,666.5 1,858.8 19.2% 2.26x 11.7x 1.96x 9.7x 7.3% 18.2%

Quest Diagnostics Incorporated 108.35 95.9% 14,779.5 18,395.5 7,588.0 1,444.0 19.0% 2.42x 12.4x 2.07x 10.0x 2.5% 1.8%

Healthcare Services Group, Inc. 51.20 94.3% 3,747.1 3,686.1 1,666.7 129.8 7.8% 2.21x 28.4x 1.91x 23.2x 18.5% 10.5%

PharMerica Corporation 29.40 100.0% 915.0 1,334.4 2,205.8 133.0 6.0% 0.60x 10.0x 0.51x 8.5x 14.4% 7.2%

RadNet, Inc. 10.25 95.1% 484.5 1,107.5 908.6 118.3 13.0% 1.22x 8.7x 1.20x 7.6x 4.0% 9.0%

Mean 87.6% $4,487.3 $756.4 14.3% 1.80x 13.4x 1.52x 11.3x 24.5% 19.7%

Median 95.1% $3,337.3 $628.4 16.3% 2.15x 11.7x 1.61x 9.7x 7.3% 10.5%

% of 52

Week HighMarket Cap.

Enterprise

Value

3 Year

Rev CAGR

Market Data Operating Statistics EV as a Multiple of: Growth

Stock Price LTM LTM FY2019 16 - '17

Company Name 8/31/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA Growth

Average

Charles River Laboratories International, Inc. $108.80 100.0% $5,178.2 $6,200.0 $1,807.4 $435.9 24.1% 3.43x 13.9x 3.15x 12.8x 9.8% 13.9%

Catalent, Inc. 41.29 99.7% 5,163.3 6,936.1 2,075.4 407.5 19.6% 3.34x 17.0x 3.19x 14.4x 15.1% 4.3%

Cardinal Health, Inc. 67.46 79.5% 21,348.0 25,023.0 129,976.0 3,069.0 2.4% 0.19x 8.2x 0.18x 7.5x 4.3% 12.6%

ICON Public Limited Company 113.39 99.2% 6,127.8 6,161.5 1,718.3 393.6 22.9% 3.59x 15.7x 3.31x 14.2x 5.0% 6.8%

PRA Health Sciences, Inc. 77.40 95.6% 4,849.2 5,574.6 1,698.5 250.9 14.8% 3.28x 22.2x 2.51x 13.2x 19.3% 15.2%

Quintiles IMS Holdings, Inc. 96.03 96.1% 20,793.1 29,049.1 6,969.0 1,507.0 21.6% 4.17x 19.3x 3.37x 13.2x 49.4% 20.6%

Thermo Fisher Scientific Inc. 187.14 99.8% 74,894.8 91,179.8 19,199.1 4,812.1 25.1% 4.75x 18.9x 4.11x 15.9x 0.0% 8.9%

Mean 95.7% $23,349.1 $1,553.7 18.6% 3.25x 16.5x 2.83x 13.0x 14.7% 11.8%

Median 99.2% $2,075.4 $435.9 21.6% 3.43x 17.0x 3.19x 13.2x 9.8% 12.6%

% of 52

Week HighMarket Cap.

Enterprise

Value

3 Year

Rev CAGR

Market Data Operating Statistics EV as a Multiple of: Growth

Stock Price LTM LTM FY2019 16 - '17

Company Name 8/31/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA GrowthAverage

U.S. Physical Therapy, Inc. $59.90 76.8% $753.6 $905.8 $377.2 $60.4 16.0% 2.40x 15.0x 2.18x 14.6x 16.2% 10.7%

HealthSouth Corporation 45.75 92.0% 4,517.1 7,544.7 3,773.4 817.1 21.7% 2.00x 9.1x 1.81x 8.8x 6.4% 17.9%

Amedisys, Inc. 52.24 79.3% 1,769.0 1,802.1 1,454.9 105.7 7.3% 1.24x 15.9x 1.15x 11.4x 6.0% 6.9%

LHC Group, Inc. 65.25 94.1% 1,192.9 1,312.5 961.6 92.0 9.6% 1.36x 14.3x 1.25x 13.1x 14.5% 12.9%

Surgery Partners, Inc. 9.75 40.5% 475.9 2,729.6 1,135.0 231.4 20.4% 2.40x 11.5x 1.53x 9.6x 17.2% 0.0%

DaVita Inc. 58.56 83.5% 11,196.7 20,563.7 15,014.2 2,448.3 16.3% 1.37x 8.3x 1.32x 8.2x 3.5% 7.0%

Acadia Healthcare Company, Inc. 46.94 86.4% 4,125.1 7,338.6 2,832.6 574.6 20.3% 2.59x 12.8x 2.39x 10.7x 1.8% 53.1%

Mean 78.9% $3,649.8 $618.5 15.9% 1.91x 12.4x 1.66x 10.9x 9.4% 15.5%

Median 83.5% $1,454.9 $231.4 16.3% 2.00x 12.8x 1.53x 10.7x 6.4% 10.7%

% of 52

Week HighMarket Cap.

Enterprise

Value

3 Year

Rev CAGR

Market Data Operating Statistics EV as a Multiple of: Growth

Stock Price LTM LTM FY2019 16 - '17

Company Name 8/31/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA GrowthAverage

HCA Healthcare, Inc. $78.66 86.4% $28,415.9 $61,040.9 $42,267.0 $8,203.0 19.4% 1.44x 7.4x 1.34x 7.0x 4.7% 6.1%

LifePoint Health, Inc. 57.95 81.7% 2,324.7 5,264.0 6,415.9 760.4 11.9% 0.82x 6.9x 0.80x 6.4x 1.1% 18.0%

Tenet Healthcare Corp. 17.17 69.1% 1,731.1 18,874.1 19,324.0 2,074.0 10.7% 0.98x 8.5x 0.98x 7.5x (2.3%) 10.7%

Universal Health Services, Inc. 108.13 83.3% 10,343.8 14,464.3 10,110.8 1,711.0 16.9% 1.43x 8.5x 1.35x 8.0x 7.6% 9.9%

Community Health Systems, Inc. 7.64 57.5% 855.2 15,518.2 17,478.0 1,780.0 10.2% 0.89x 8.6x 1.06x 8.5x (13.0%) 4.5%

Kindred Healthcare, Inc. 8.10 68.1% 704.9 4,027.4 7,081.4 470.6 6.6% 0.57x 8.6x 0.65x 4.9x (15.9%) 13.4%

Mean 74.3% $17,112.8 $2,499.8 12.6% 1.02x 8.1x 1.03x 7.0x (3.0%) 10.4%

Median 75.4% $13,794.4 $1,745.5 11.3% 0.93x 8.5x 1.02x 7.2x (0.6%) 10.3%

% of 52

Week HighMarket Cap.

Enterprise

Value

3 Year

Rev CAGR

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CHILDS Advisory Partners

EXTENSIVE HEALTHCARE SERVICES EXPERIENCE

Sell-side advisor to NLS Animal Health on its sale to Henry Schein▪ National distributor of veterinary medicine pharmaceuticals

Sell-side advisor to Almedica on its sale to Aptuit▪ Global clinical trial packaging and logistics services

Sell-side advisor to Nursefinders on its recapitalization with Goldman Sachs UIG▪ Travel and per diem healthcare staffing services to US hospitals

Sell-side advisor to Accountable Healthcare Staffing on its recapitalization with Mitsui & Co.▪ Healthcare staffing services to hospitals and other outpatient facilities

Sell-side advisor to Gwinnett Emergency Specialists on its sale to Envision Healthcare▪ Emergency medicine practice serving 150,000 annual visits in greater Atlanta market

Sell-side advisor to Trinity Healthcare Staffing Group on its sale to Travel Nurse Across America▪ Travel nurse staffing and workforce management services

Sell-side advisor to Travel Nurse Across America on its recapitalization with Gridiron Capital▪ Travel nurse staffing services, including training & testing, to US hospitals

Sell-side advisor to HMS Consulting Group on its sale to HCTec▪ Workforce management solutions for the healthcare industry

Sell-side advisor to Advanced Medical on its recapitalization with Clearview Capital▪ Occupational, physical, and speech therapy staffing solutions

Sell-side advisor to aspen advisors on its sale to The Chartis Group▪ HCIT consulting, implementation and optimization services

Sell-side advisor to InterMed on its recapitalization with Wafra Partners▪ Medical equipment management services to US hospitals

Sell-side advisor to McKinnis on its sale to Navigant▪ Revenue cycle management consulting services to US healthcare organizations

Sell-side advisor to ScribeAmerica on its recapitalization with Chicago Growth Partners▪ Medical scribe education, training, and managed services to hospitals

Sell-side advisor to PharmaLogics Recruiting on its recapitalization with Webster Capital▪ Recruitment Process Outsourced services to global life sciences market

Sell-side advisor to locum leaders on its sale to Onward Healthcare▪ Physician staffing services to US healthcare systems and practice management organizations

Sell-side advisor to Sharp Packaging on its sale to UDG Healthcare▪ Outsourced pharmaceutical primary and secondary packaging services

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CHILDS Advisory Partners

FIRM OVERVIEW

• Former healthcare investment banker with UBS and Piper Jaffray

• 15 years of investment banking experience

• JD from University of Georgia School of Law and MBA from Columbia Business School

Ross DeDeynManaging Director

• Founded and led Robinson-Humphrey’s Business Services practice starting in 1992

• Executed over 100 Professional Services transactions

• MBA from Darden School of Business at University of Virginia

Cooper MillsManaging Director

• Former Managing Director for Blackstone Advisory Partners, the M&A advisory arm of Blackstone

• 20 years of investment banking experience, executing $40B+ of M&A transactions

• MBA, Harvard Business School

Jason WallaceManaging Director

• Former executive at MPS Group and Volt Information Sciences

• Sourced and executed over 50 Professional Services transactions

• Focuses on corporate and business development strategy

Dave PhillipsManaging Director

• Prior corporate finance and restructuring experience with FTI Consulting

• Over 9 years of investment banking experience

• BS in Economics from Vanderbilt University, summa cum laude

Steve DyottVice President

• Prior M&A experience with Piper Jaffray

• JD from University of Georgia School of Law and MBA from Terry College of Business at the University of Georgia

Ryan SugrueVice President

• Prior M&A experience with FMI Capital Advisors

• Over 5 years of investment banking experience

• BS in Business Administration from Washington & Lee University

Robert WombleAssociate

• Prior investment banking and capital markets experience with Wells Fargo Securities and Goldman Sachs

• BA from Duke University

Kenny OsakweAssociate

3438 Peachtree Road, Suite 1400 Phipps Tower | Atlanta, GA 30326 | 404.751.3000 | www.childsadvisorypartners.com

HEALTHCARE SERVICES TEAM

QUICK FACTS ACCOLADES

• 44 professionals across four offices in the U.S. with headquarters in Atlanta

• 72 Closed Transactions Since Beginning of 2014

• Over 450 Middle Market Transactions Completed (EV less than $1B)

• 60% financial / 40% strategic buyer mix

• Market-leading close rate

• 2016 US Boutique Investment Bank of the Year Winner

• 2014 Cross-Border Transaction of the Year Finalist

• 2014 Professional Services Transaction of the Year Finalist

• 2013 Strategic Acquisition of the Year Winner

CORE COVERAGE SERVICES

Human Capital

B U S I N E S S

S E R V I CE SH E A L THCA R E T E CHN O L O G Y

Industrial Services

Services

Technology

Professional Svcs

Software

MERGERS & ACQUISITIONS

CAPITAL

RAISES

MERGERS & ACQUISITIONS