Publicly traded radiology firm RadNet seeing ‘very active’ market for imaging center acquisitions
Publicly traded radiology provider RadNet is seeing a “very active” market for imaging center acquisitions and already completed more than a dozen deals in the first half of 2021.
Chief Financial Officer Mark Stolper discussed the Los Angeles-based firm’s M&A activity at a recent virtual investor conference. He labeled many of this year’s moves as smaller “tuck-in” acquisitions, where a larger company absorbs the smaller entity into its platform.
The purchases included 10 facilities in New York’s metropolitan area during the first quarter of 2021 and five more across the Empire State, New Jersey and California in Q2.
“It’s very active right now,” Stolper told attendees at Sidoti & Company’s Fall Small Cap Conference on Sept. 23. “Generally, these deals find us. We don’t go knocking on any doors,” he added later. “We like motivated sellers and because we are the larger player in the vast majority of markets in which we operate, there aren’t other industry consolidators that have come into our markets. Nor do we anticipate any would want to, given that the rest of the country is ripe for consolidation and doesn’t have a big corporate competitor like a RadNet who has a lot of access to capital, deep management team and a lot of business acumen.”
RadNet bills itself as the largest owner and operator of fixed-site imaging centers, with roughly 350 concentrated in California, Maryland, Delaware, New Jersey, New York and Arizona. Founded in 1980 as a single site, the company expects to generate $205 million in earnings (before interest, taxes, depreciation and amortization) on $1.325 billion in revenue this year.
About 25% of RadNet’s centers are held through joint ventures alongside hospital systems, and it expects that number to hit 50% within the next several years. Just recently, the company connected with Dignity Health and acquired eight centers, marking its first foray into Arizona where it plans to grow “aggressively” in the coming years, Stolper said. RadNet now has 20 joint ventures and two-thirds of those are “unconsolidated” (with RadNet owning 35%-50%) while the remaining one-third are consolidated (50%-94%). Other partners include MemorialCare in California (34 centers), RWJ Barnabas in New Jersey (27) and Cedars Sinai in the Los Angeles area (5).
“Hospitals recognize that they’re losing business to the outpatient players,” Stolper said. “Many of the entrepreneurial and forward-thinking hospitals are looking to partner with us to be able to participate in that trend.”
Stolper said RadNet is being approached “more and more” by hospitals about the possibility of further joint-venture deals. Those include providers with whom they already have relationships in core markets and new emerging prospects. He sees opportunity to enter new geographies with the help of hospital partners.
“We never want to be a small player in any of the markets in which we operate,” Stolper told attendees. “And [joint ventures are] one of the ways of getting into a new market without making a substantial either capital investment or an acquisition. Particularly where today private equity seems to be very interested in new geographic platforms, this allows us to go into a new location with the strength of a hospital partner with all of those relationships and do it in a less capital-intensive way.”
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.