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Understanding Private Equity in the Healthcare Market June 2019 Table of Contents

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Understanding Private Equity in the Healthcare Market June 2019 Table of Contents UNDERSTANDING PRIVATE EQUITY IN THE HEALTHCARE MARKET JUNE 2019 TABLE OF CONTENTS SECTION PAGE I. BCA Introduction 1 II. Healthcare Market Dynamics 8 III. What is Private Equity? 13 IV. What is a Recapitalization? 17 V. Appendix 20 I. BCA INTRODUCTION BCA IS ONE OF THE LARGEST HEALTHCARE BOUTIQUE INVESTMENT BANKS KEY FACTS 19 $6.4 billion 1 PARTNER-OWNED Total Investment Bankers Total Transaction Value 90% 10.9x 2 RELATIONSHIP-DRIVEN Closure Rate Avg. EBITDA Mult. For Healthcare Services Deals Closed in 2018 3 HEALTHCARE-FOCUSED 100 $85 million Total Transactions Closed Average Transaction Size 4 RESULTS-ORIENTED RELEVANT HEALTHCARE SERVICES TRANSACTIONS Recapitalization Sell-Side Recapitalization Recapitalization Recapitalization RecapitalizationSell-Side Recapitalization Recapitalization Recapitalization Recapitalization Recapitalization Recapitalization Recapitalization Recapitalization Led By Led By Led By Sell-Side Advisory Recapitalization Recapitalization Sell-Side Advisory Led by Led by Led by Led By to Led by Led By to UnitrancheRecapitalization Debt RecapitalizationGrowth Equity RecapitalizationSell-Side Buy Side Recapitalization Sell-Side Recapitalization Recapitalization Recapitalization Recapitalization Acquired Recapitalization Debt-Private placement Equity Investment Sell-Side Advisory Recapitalization Led By Led By Led By Sell-Side Advisory Led by Led by Led By to Led by to $113,000,000 1 OUR HEALTHCARE INVESTMENT BANKING TEAM EXTENSIVE INDUSTRY KNOWLEDGE & EXPERIENCED INVESTMENT BANKERS 2 3 DEEP BENCH 1 TRANSACTION EXPERIENCE Kevin Murphy Tom Wylly Nick Carteaux L.A. Galyon John Kibler Dave Meagher John Allgood Managing Partner Senior Partner Partner & Managing Director Partner & Managing Director Managing Director Managing Director Director Porter Meadors Cook Wylly Becky Gregg John Maher Amanda Phillips Patrick Price Nolan Young Director Director Director Director Director Associate Associate Kyle Witty Brian Brett Samantha Knee Michael Steedman John Travisano Associate Senior Analyst Senior Analyst Analyst Analyst 2 BCA IS LOCATED IN THE CENTER OF NASHVILLE'S VIBRANT HEALTHCARE ECOSYSTEM Located in Nashville, Tennessee, BCA has strong relationships with key players across all healthcare verticals. RCM Healthcare Technology Pharmacy Payer IT/Tech-enabled Solutions Behavioral Health NASHVILLE Dental For-Profit Hospitals Outsourced Services 3 OUR APPROACH BCA takes an innovative and effective approach to staffing and executing engagements. STAFFING APPROACHES TRADITIONAL APPROACH OUR APPROACH TRADITIONAL INVESTMENT BANKS BRENTWOOD CAPITAL ADVISORS ▪ Origination and execution performed ▪ Industry bankers focus on Senior Bankers Senior Bankers within industry groups. origination. ▪ Senior bankers focus on origination ▪ Senior M&A bankers lead and while junior bankers handle execute every phase of a transaction. execution. Execution Origination ▪ Result—~90% closure rate and ▪ Result—~40% closure rates. superior values and terms. Industry Group Industry Execution Junior Bankers Junior Bankers ENGAGEMENT & EXECUTION Origination Process Healthcare Diligence Marketing Documentation Technology TRANSACTIONS Pre-Marketing 1st Round Bids Exclusivity 2nd Round bids Closing Outsourced Services ▪ Each deal is staffed by a six-person deal team. Superior Results and ▪ Executed by dedicated M&A professionals. Industry-Leading We Underwrite Transactions like Buyers. ▪ Skills and practices shared across industry sectors. Closure Rates. 4 STRONG FIT, THOUGHTFUL PROCESS DESIGN, FLAWLESS EXECUTION Healthcare Buy-side Sell-side Non-Healthcare $10-$25 $26 - $100 83% 7% 93% M&A AND CAPITAL RAISING FOCUSED 17% 22% 53% ▪ 19 investment bankers. M&A & Equity Debt INDUSTRY MIX TRANSACTION TYPE TRANSACTION SIZE Transactions (#) 81 19 Value ($ in millions) $5,760 $680 >$100 25% 1 - 10 >25 Multi-Step ESIGNING ROCESSES HAT EET PECIFIC RANSACTION EEDS Dual-Path 5% 65% D P T M S T N One-Step 85% 60% 15% ▪ Negotiated, targeted and controlled auctions. Strategic Only 15% 11-25 ▪ Maximize confidentiality, competitive tension 25% and valuation. BUYER ▪ Senior investment banker leadership at every BID MECHANICS # OF PARTICIPANTS OMPOSITION step in the process. C ▪ Extensive transaction experience. ▪ Minimize management distraction. Financial Only 25% TAKING THE “PULSE” OF THE MARKET EVERY DAY TRANSACTION EXECUTION STAGE ▪ Closed 8 transactions in 2018 and 4 in 2019 2 Deals 7 Deals 4 Deals 2 Deals 4 Deals YTD. Recap Recap ▪ Project Project Project Project 15 engagements: Predator Onsite Pikes Peak Napa Project Project Project Project Project Project Project Project ‒ 2 signed but inactive; Marvel Rainforest Robusto Pioneer Brickyard Nighthawk Antman Halo ‒ 7 in pre-marketing, Project Project Project Sale Sale ‒ 4 in marketing; Monopoly Astro Learn ‒ 2 in the process of closing. ▪ Daily contact with buyers. Signed Pre-Marketing Marketing Exclusive/ Closed but Inactive Closing 5 CASE STUDY – CAMELLIA HEALTHCARE (“CAMELLIA”) COMPANY OVERVIEW ▪ A leading home-based care provider with 34 ▪ Encompass Health (NYSE: EHC) offers both facility-based and offices that offer hospice, home health and home-based patient care through its network of inpatient private duty services in Alabama, Louisiana, rehabilitation hospitals, home health agencies and hospice Sell-Side Advisory to Mississippi and Tennessee. agencies. Encompass’ national footprint spans 128 hospitals and 268 home health & hospice locations in 36 states and Puerto Rico. SITUATIONAL OVERVIEW BCA STRATEGY Undisclosed ▪ Camellia had been a family-owned and ▪ BCA designed a competitive process that included strategic and operated business for over 40 years financial buyers and articulated Camellia’s unique market Client Testimonial and had grown to become a regional position of being a multi-state platform with three growing lines leader with operations in four states. of business. “Brentwood Capital Advisors has been a ▪ ▪ BCA created offering materials that highlighted the Company’s highly valued and trusted advisor to our With valuations in the sector company for many years, serving improving, BCA was asked to evaluate strong clinical and compliance record as well as its strategic instrumental roles in arranging the strategic alternatives, which included position in difficult to penetrate CON states in the Southeast. capital that allowed us to grow and in this selling all or parts of the Company in a last transaction advising on the sale of our family’s business. We truly value the 100% or majority sale. TRANSACTION RESULT timely, sound and objective advice and ▪ the day-to-day involvement provided by Camellia received several attractive offers from participants that BCA’s senior investment bankers wanted to truncate an intensely competitive process and go throughout every step of our sale of exclusive. process. BCA’s team did a great job designing and executing on a sale ▪ Camellia successfully completed its sale to Encompass Health, strategy that fostered competitive maximizing value for shareholders and creating a positive tension throughout the process and closing a transaction that resulted in the outcome for employees. highest value for or our shareholders and best outcome for our employees and patients.” - Abb Payne CEO, Camellia Healthcare 6 CASE STUDY – ANDERSON REGIONAL MEDICAL CENTER (“ANDERSON”) COMPANY OVERVIEW ▪ Leading not-for-profit regional medical center based in ▪ National specialty lender of senior debt financing solutions Meridian, MS. dedicated exclusively to middle-market companies in the Senior Debt Placement healthcare industry. Led by SITUATIONAL OVERVIEW BCA STRATEGY $25,000,000 ▪ Recent acquisitions and delays in transitioning provider ▪ Advised Company to conduct a broad process to identify and number negatively impacted liquidity. partner with a new senior lender to refinance and expand its credit facility. ▪ Client Testimonial HIS upgrade in late 2012 temporarily interrupted billing, creating some short-term liquidity issues. ▪ Assisted management in preparing a confidential memorandum and pro-forma analysis that more accurately "This financing from HFG will reflected normal steady state operations. enable Anderson to continue to serve the Eastern Mississippi/Western Alabama region as its largest healthcare provider. We were pleased to work with Brentwood Capital who positioned Anderson with lenders and structured a competitive TRANSACTION RESULT process that resulted in the right ▪ Anderson completed a senior debt refinancing led by HFG. partner in Healthcare Finance Group." ▪ Anderson refinanced existing indebtedness as part of the - Ray Humphreys transaction. CEO, Anderson Regional Medical Center 7 II. HEALTHCARE MARKET DYNAMICS HEALTHCARE MACRO TRENDS The healthcare market has grown considerably but is in the process of changing. HEALTHCARE AS A PERCENTAGE OF US GDP OBESITY LEVELS Americans are not getting healthier, physical activity is down and by 2030 half of all adults will be obese. 30% 25% 25% 2010 OBESITY LEVELS 2030P OBESITY LEVELS 20% 18% Not Obese 15% 13% 64% Not Obese Obese 10% 50% Obese 50% 5% 5% 36% 0% 1960 2000 2018 2027P BABY BOOMERS MEDICARE There were 4.6 working Americans per beneficiary when Medicare launched in 1966, that ratio fill fall to 2.3 by 2030. 5 4.6 4 3 2.3 77M 10k 2 Baby Boomers in US Baby Boomers Retiring per Day 1 0 1966 2030P The Medicare Trust Fund will be depleted by 2026, costs will have to decline. 8 RETAIL AND CONSUMERS IMPACT ON HEALTHCARE OVERVIEW TRADITIONAL HEALTHCARE EXPERIENCE SATISFACTION ▪ Healthcare systems are
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