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Medium Mergers & acquisitions Opportunity assessment Profitability analysis Market sizing

Hanover Health

#Healthcare #Private Equity
ProHub Comment

This case tests profitability analysis and market opportunity assessment for a healthcare PE investment. The key insight is recognizing that declining EBITDA margins in 2023 are caused by temporary fixed costs from launching x-rays (a higher-margin service), not operational deterioration, which actually supports the investment thesis. Candidates must balance quantitative financial analysis with strategic judgment about service expansion and competitive positioning.

Estimated Time 15 minutes
Difficulty Medium
Source Tuck
50 / 100
Your client, a private equity fund, is evaluating the potential acquisition of Hanover Health. HH operates a series of urgent care clinics throughout the US and has grown quickly over the past 5 years. Your client has little experience in the industry and needs to quickly evaluate the opportunity. Your client would like to grow EBITDA each year during the investment horizon with minimal capital expenditure. How should you evaluate the opportunity? Should the fund invest in HH?

Clarifying Information

  1. Geography: HH operates throughout the US
  2. Business: HH clinics only services customers with healthcare (steer away from insurance issues) and offers 3 out-patient procedures: vaccinations, physicals, and x-rays
  3. Objective: EBITDA growth above 10%
  4. Time: The client is interested in a standard exit in 3-5 years
  5. PE Client: no direct healthcare experience but operates a nurse-staffing/talent management portfolio company
  6. Competitive Landscape: There are many players in the very fragmented out-patient urgent care segment in the US (meaning good growth opportunities)
  7. Industry: Primary profit drivers for out-patient urgent care are cost-effectiveness and time efficiency