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5 things to know about follow-on deals

November 13, 2017
by Julie Miller, Editor in Chief
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After an initial platform deal, private equity investors look for secondary, add-on deals that enhance their portfolios by filling gaps and building scale. Here are five things to know about follow-on deals.

  1. The valuations of the add-on acquisition targets are often lower. A transaction might include a $5 million or $10 million target.

  2. Acquisitions might include specific levels of care that build out the continuum. For example, a portfolio that has existing residential capacity might seek outpatient facilities as deal targets.

  3. Add-ons can be valuable if they serve new geographic markets, thus, creating a larger opportunity for the entire enterprise to expand.

  4. Follow-on deals can change the payer mix, for example, by adding in-network status to a portfolio.

  5. Some deals might have the additional attraction of an established technology backbone or an executive team that could be leveraged in new roles across the enterprise.