What this Landmark Deal Means for Rehab M&A
This week, Paul addresses the recent announcement that Doctors of Physical Therapy has acquired Empower Physical Therapy. Watch now to find out how this transformative deal will reverberate throughout our industry.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good morning and welcome to another special episode of the Martin Rehab M&A advisory. Today is a special episode because I'm excited to announce to all of you a very significant development in the outpatient rehabilitation industry. On January 23rd, there was an announcement that Doctors of Physical Therapy, better known as DPT, announced their acquisition of Empower Physical Therapy. Let me tell you guys, this move is more than just an expansion. It's really a transform. It's transformative for both organizations. Going back to DPT, they were founded in 2005.
They've grown from literally a familyrun clinic to over a 100 locations across 24 states, and they employ more than 400 practitioners. Their focus has always been on evidence-based physical therapy treatments, delivering top-notch care, and protecting that homebased physical therapy, community-based physical therapy practice. Aaron Kraai over these last few years has done a phenomenal job building infrastructure within that business to enable them to do an acquisition like empower physical therapy. They were established in 2018 and they've built a really strong reputation for clinical excellence patient centered care.
They have over 150 clinicians operating out of Arizona, California, Louisiana, big presence in Texas. And Empower offers a wide range of services including pre and psurgical rehabilitation, chronic injury management, work injury rehabilitation, and again has done just a really good job in building that business. So now combining these two entities and again this was an acquisition by doctors of empower but by combining these two entities it literally overnight creates another powerhouse in the physical therapy industry. The merged company, these two companies together will have nearly 160 locations, significantly enhancing their ability to deliver quality care to a broader patient base.
Now, let's talk about what this means for private rehab companies and the rehabilitation mergers and acquisitions market. Historically, big deals like this, they trigger a wave of subsequent acquisitions. This signals confidence in this market and it encourages other companies to explore similar type of opportunities. Large businesses acquiring other large businesses, whether it is an acquisition or a merger. It typically encourages other companies to explore these kinds of opportunities with doctors of physical therapy acquisition of empower. We expect a similar effect to happen. This moves positions this move positions doctors of physical therapy to transition from a regional entity to now a national player.
Increasing competition for those prime acquisition targets market by market. You know, you have those two or three 20 plus location companies in these states across the United States. It will increase competition for those types of targets. And don't think for a second that DPT and their combined entity with empower is not going to go out looking for those kinds of opportunities. And then other companies recognizing the emergence of this now formidable competitor may speed up their M&A strategies as well to secure the best deals available in the market today.
This heightened competition is likely is likely to drive valuation multiples up slightly. We can't say that for sure, but typically with added competition, it drives multiples up. Firms are competing for the most promising and best opportunities. It's a classic case of supply and demand where the presence of an additional very well- capitalized buyer intensifies the race for quality ready physical therapy practices. It's also worth noting that there are still a few private equity-backed large companies that are out in the market today that still have been unable to recapitalize.
This deal potentially could expedite those transactions as again increased market activity and competition makes recaps more attractive to the larger market. Also, this acquisition combined with the current economic conditions as well as a pro business administration, this could begin to push multiples in the right direction. However, only time will tell how these factors play out. At Martin Healthcare Advisors, we still are looking at multiples that are not to the levels of 2021 and 22, but seem to be pushing beyond the 23 and 24 years. You know, Martin Healthcare Advisors, we also believe that this scenario underscores a very critical lesson for all PT business owners.
And it's the importance of what we call readiness in a competitive landscape of rehabilitation, mergers, and acquisitions. And believe me, it is a competitive landscape on the seller side. It's a competitive landscape. There's lots of companies putting their hand up right now. So, there's a lot of competition going into these deals. So, being prepared to act when the market presents opportunities is absolutely crucial so that you can stand out among those other competitors. Organizations that have literally executed on their strategic plans and that they're prepared for rigid due diligence, a rigid due diligence process, making sure their financials are in order, operating at very high levels of efficiencies.
These are the companies that can move quickly to capitalize on these kinds of conditions. Conversely, those that are unprepared may find themselves, you know, I hate to put it this way, but sidelined. You know, being pulled over and you got you got to fill up with gas. And they're going to miss out on the best deals that could propel their growth and market presence. And they're going to watch deals happening around them, unfortunately. So in conclusion, the acquisition of empower physical therapy by DPT, doctors of physical therapy, I see this as a landmark event with farreaching implications.
It reshapes the trajectories of the involved organizations. Both of those organizations are going to benefit from this. And it serves as creating a bellweather for the rehabilitation M&A market. And I should say another bellweather for the rehabilitation M&A market. So as we watched the impact of this deal unfolding and I believe that they will move rather fast based on the infrastructure that Aaron Kraai has put in place in doctors of physical therapy and as I said empower PT is also one to be reckoned with really strong presence in Texas and other states.
So this is going to create a really strong company. But one thing remains clear in the world of mergers and acquisitions. Fortune favors the prepared. Okay? You know, those companies out looking to make big deals are going to look for those that are prepared so that they can move efficiently. So staying informed, remaining agile and ready to act is essential for your success in this ever evolving industry. I want to thank all of you for joining me today on this special episode of the Martin Rehab M&A advisory and stay tuned for more insights and updates as we continue to keep you up to date and informed on the latest developments in our very tremendous outpatient rehabilitation industry.
I look forward to talking to you all in the future. If you have any questions about our show today, click below and let's talk. Thanks and have a great day.
Want to talk about your own business?
Marlton, NJ 08053