New IPO Advent Health says its roll-up strategy will make a splash

Companies with ‘roll-up’ strategies have not always succeeded on the local bourse – one example being smash repairer Automotive Solutions Group, which listed in December 2016 and fell 65 per cent before it was acquired by AMA Group.

A roll up strategy involves combining several smaller businesses into one entity.

Cris Massis, boss of soon-to-be-listed allied health group Advent Health (ASX:AH1), believes his company is different being in the healthcare sector and having carefully considered each and every vendor acquisition.

“Quite often rollups get a bad name because you’re trying to consolidate everything and almost commoditise what you try to do,” Massis told Stockhead.

“But healthcare is a different because it is personalised and consumer focused. Vendors aren’t your single operators, they are group-to-group so it is not a bunch of small businesses trying to create some synergies.”

Advent’s group is comprised of 300 clinicians in 12 allied health practices groups with 59 individual practices between them. It includes a very broad range of clinicians including (but not limited to) chiropractors, podiatrists, occupational therapeutics, physiologists and dieticians.

“This is not a typical roll up of micro businesses; it’s a group of groups,” said Massis.

“Many of our vendors are semi-corporate types, or have significant infrastructure, footprint, revenues or growth.

“The vendors not looking for an exit, certainly they want to grow more but they’ve probably hit their glass ceiling in terms of ability to gain capital. For us that’s where we come in.”

Massis noted many vendors had been in business for several years. This experience gives Advent insights into how to integrate the businesses while maintaining a feeling of being local and independent.

“In healthcare we feel local brands in local communities is the best healthcare so we’re not about putting in a whole stag of corporate office overheads and rebranding everything,” he said.

IPO on track, despite COVID-19

Advent’s offer opened on 26 May and closes on June 26, with a planned listing date of July 15.

The company initially lodged its prospectus in March but had to re-submit forecasts in light of the pandemic. The roadshow had to proceed digitally but Massis told Stockhead it was going well.

“I think it’s been well received, not only because of the sector and the growth opportunity, but because of the way it’s been designed from a management and vendor point of view,” he said.

“I think it ticks a lot of boxes for many institutions and investors.”

While many sectors face permanent change as a result of the COVID-19 pandemic, healthcare is not one of them.

“All healthcare is general was deemed as essential service during pandemic, so our doors remained open,” Massis said.

“We took minor hit in April, dropped 20 per cent but we’re back to pre-COVID levels already. The sector itself is resilient.”

Massis also thinks some healthcare services will see a rise in demand post-COVID-19. He named mental health services and services addressing muscular and skeletal pain due to people working from home.

“I think there’s going to be a big need for healthcare services in the community keeping people out of hospitals,” he said.