HEALTHCARE SERVICES QUARTERLY UPDATE Q4 2018

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1 HEALTHCARE SERVICES QUARTERLY UPDATE Q4 2018

2 Transaction Value ($ Billions) Transaction Volume (Number of Deals) INDUSTRY OVERVIEW M&A TRANSACTIONS & PERFORMANCE 25.0 NORTH AMERICAN HEALTHCARE SERVICES M&A ACTIVITY Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q Transaction Value Transaction Volume All figures are in $CAD. Throughout 2018, the Healthcare Services sector saw a significant amount of merger and acquisition (M&A) activity. Deal volume peaked in the fourth quarter of 2018, however, deal size seemingly dissipated, only achieving $400 million in disclosed transaction value. Deals in this sector have been fairly distributed and involve various players, such as pharmaceutical, hospitals/centers, equipment distributors, retail drug, biomedical, and health technology companies. Consolidation remains a key theme in the industry, as providers seeks to navigate an increasingly competitive environment by achieving greater scale. Precedentsetting deals across the healthcare industry are expected to continue into 2019, serving as a primary business strategy for a number of predominant healthcare service companies. RETAIL PHARMACY NEWS & DEVELOPMENTS DENTAL PRACTICE NEWS & DEVELOPMENTS HEALTHCARE CENTER NEWS & DEVELOPMENTS Over the past year, many changes have occurred in the pharmacy and drug store sector. Provincial drug programs have impacted industry operators by restricting prescription prices to lower healthcare costs to consumers. Imposed generic drug price cuts have limited profit margins yet increased volumes sold due to its increasing affordability. Many chain pharmacies and drug stores have received further incentives from pharmaceutical manufacturers to stock their drugs. The industry landscape is dominated by larger chains and broader networks of independent pharmacists. Consolidation has been the norm for many operators that would benefit from economies of scale with increased merger and acquisition activity. The dental practice industry within Canada has remained steady over 2018 with profits margins standing at 32 percent of industry revenue. More multipractitioner dental practices are emerging, as dentists are choosing a group business model to share fixed operational costs and boost profitability. Dental practice management companies continue shaping the industry's landscape, combining private equity capital and expertise with patient care. The industry is trending toward moderate market share concentration, as these management companies have an increasing appetite for acquisitions of established dental practices. Demographic changes and the increasing acceptance of complementary and alternative medicine therapies drove industry revenue growth for 2018 in the healthcare center sector. Healthcare practitioners are increasingly in search of partnering, becoming affiliated or combining with larger entities such as hospitals, group practices, or physician organizations. Consolidation efforts often help centralize business functions, purchasing decisions, and also provides growth opportunities. Sources: Capital IQ and IBIS World. Data as of December 31, Page 2

3 SELECT RECENT M&A TRANSACTIONS acquired Closed Dec 20, 2018 TEV Undisclosed TEV/EBITDA Undisclosed TEV/Revenue Undisclosed MNP Corporate Finance Inc. provided financial due diligence services to Equicapita Investment Corp. Equicapita Investment Corp. is a private company buyout fund with more than $170 million in assets under management (AUM), focused on acquiring private Canadian businesses. Shaw Group of Dental Laboratories is one of the leading networks of dental laboratories in Ontario whose diverse customer base includes more than 1,500 dentists. acquired Closed Nov 30, 2018 TEV Undisclosed TEV/EBITDA Undisclosed TEV/Revenue Undisclosed MNP Corporate Finance Inc. acted as exclusive financial advisor to My Pharmacy Ltd. in structuring and negotiating this transaction. My Pharmacy is located in Prince Albert and prides itself on its genuine pharmacistpatient relationships. For nearly 35 years the shareholders have proudly serviced the Prince Albert community. Rubicon operates more than 100 locations across Western Canada. Rubicon's mission is to own and operate pharmacistcontrolled retail pharmacies. Rubicon provides leading pharmacy care and an alternative ownership option for pharmacists. acquired Closed* Nov 16, 2018 TEV $7.6 billion TEV/EBITDA 7.5x TEV/Revenue 0.9x *Previously announced Q RCCH HealthCare Partners owns and operates hospitals, outpatient centers, physician practices and urgent care centers in the U.S. The company focuses on offering hospital and healthcare services to nonurban communities. LifePoint Health, Inc. owns and operates community hospitals, regional health systems, physician practices, and outpatient centers in the U.S. The company operates 89 hospital campuses with over 10,000 licensed beds in 30 states. acquired Source: Capital IQ and Pitchbook Unless otherwise denoted, all figures are in $CAD. Announced Nov 15, 2018 TEV TEV/EBITDA TEV/Revenue $2.5 million Undisclosed Undisclosed WELL Health Technologies Corp. (TSXV: WELL) is the owner and operator of a portfolio of primary healthcare facilities. WELL aims to positively impact health outcomes by leveraging technology to empower and support patients and doctors. NerdEMR Services Ltd., through its software as a service (SaaS) platform, provides open source clinical application resource (OSCAR) electronic medical records (EMR) solutions. The company is based in Vancouver, B.C. Page 3

4 Thousands of People Percentage $CAD Billions $CAD MACRO ECONOMIC INDICATORS The healthcare industry is affected by a number of key macro economic industry growth drivers. Below, we highlight total public and private health expenditure, per capita disposable income, national unemployment rates and the aging population in Canada. According to consensus analyst data, the forecast is positive for each indicator over the next five years, supporting the view of continuing industry stability and growth. TOTAL HEALTH EXPENDITURE CANADA PER CAPITA DISPOSALBLE INCOME CANADA ,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 Historical Forecast Historical Forecast 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 POPULATION AGED OVER 65 CANADA 1 10% 8% 6% 4% 0% NATIONAL UNEMPLOYMENT RATE Historical Forecast Canada U.S. Source: IBIS World, F indicates forecast. Page 4

5 PUBLIC COMPARABLE ANALYSIS GROWTH, MARGINS & MULTIPLES LTM REVENUE GROWTH NTM REVENUE GROWTH 6% 4% 4% 5% 1% 3% 8% 5% 5% 8% 0% 4% 6% 8% 10% 0% 4% 6% 8% 10% LTM EBITDA MARGIN 19% 15% NTM EBITDA MARGIN 20% 17% 15% 15% 34% 41% 4% 5% 0% 10% 20% 30% 40% 0% 10% 20% 30% 40% 50% LTM EV/EBITDA 13.1x 10.7x NTM EV/EBITDA 12.8x 9.7x 8.7x 8.3x 8.1x 7.6x 12.8x 12.0x 10.8x 8.0x 0.0x 5.0x 10.0x 15.0x 0.0x 5.0x 10.0x 15.0x Source: Capital IQ. Data as of December 31, Above noted healthcare peer groups are market capitalization weighted indexes, including the constituents listed on page 7. LTM refers to last twelve months. NTM refers to next twelve months. Figures above are based on median peer group metrics. Page 5

6 PUBLIC COMPARABLE ANALYSIS PERFORMANCE ANALYSIS 15.00% 10.00% 5.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% HEALTHCARE PEER GROUP SHARE PRICE PERFORMANCE Q % % % 40.00% 30.00% 20.00% 10.00% 0.00% 10.00% 20.00% SHARE PRICE PERFORMANCE % 4.8% % HISTORICAL LTM EV/EBITDA x 17.0x 15.0x 13.0x 11.0x 9.0x 7.0x 5.0x 15.4x 12.8x 8.8x 8.6x 8.4x Source: Capital IQ. Data as of December 31, Above noted healthcare peer groups are market capitalization weighted indexes, including the constituents listed on page 7. LTM refers to last twelve months. NTM refers to next twelve months. Page 6

7 PUBLIC COMPARABLE ANALYSIS TRADING MULTIPLES & OPERATING STATISTICS We have selected a group of publicly traded healthcare entities for this highlevel analysis. These public companies help act as a proxy for the industry, and provide strong industry context. (Figures In $CAD Millions, except percentages and ratios) Market Capitalization Enterprise Value LTM Operating Figures NTM Consensus Estimates Valuation Revenue Growth EBITDA Margin Revenue Growth EBITDA Margin NTM EV/EBITDA LTM EV/EBITDA Company Revenue EBITDA Median #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NUM! #NUM! #NAME? #NAME? #NAME? Mean #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #DIV/0! #DIV/0! #NAME? #NAME? #NAME? Median #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NUM! #NUM! #NAME? #NAME? #NAME? Mean #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #DIV/0! #DIV/0! #NAME? #NAME? #NAME? Pharmaceutical Distributors Median #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NUM! #NUM! #NAME? #NAME? #NAME? Mean #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #DIV/0! #DIV/0! #NAME? #NAME? #NAME? Median #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #NUM! #NUM! #NAME? #NAME? #NAME? Mean #NAME? #NAME? #NAME? #NAME? #NAME? #NAME? #DIV/0! #DIV/0! #NAME? #NAME? #NAME? LTM EV/REV Source: Capital IQ. Data as of December 31, LTM refers to last twelve months. NTM refers to next twelve months. Page 7

8 MNPCF LEADERSHIP TEAM TRANSACTION LEADERSHIP Brett Franklin President Aleem Bandali Dale Antonsen Mike Reynolds Mark Regehr Dan Porter Stephen Shaw Jason Burgess Patrick Khouzam Craig Maloney DUE DILIGENCE LEADERSHIP John Caggianiello Johnny Earl Page 8

9 MNPCF RECENT TRANSACTIONS NATIONAL Page 9