Tuck-In Talent: 6 Years, 5 Platforms, 30 Add-Ons

Without question it’s great to love what you do for a living, but it’s also fulfilling if what you do makes a difference in people’s lives. Building impactful companies is what partly motivates Josh Weber, managing director of MBF Healthcare Partners, and it also helps distinguish the Florida-based firm, which today focuses largely on buying and selling companies in healthcare services, more recently in the autism services, hospice, and primary care sectors.

But MBF’s most distinctive feature in the crowded M&A market is its long list of tuck-in acquisitions. Cases in point: Since 2017, one of MBF’s home-grown portfolio companies, Palm Medical Centers, has added 16 locations through the acquisition of seven medical practices, expanding its geographic footprint and increasing revenue nearly 40% per year; and Acorn Health, one of MBF’s previous portfolio companies and a provider of Applied Behavioral Analysis (ABA) services to children diagnosed with autism, acquired 14 companies from late 2018 through the company’s sale in August last year to Ontario Teachers’ Pension Plan Board.

Since 2016 and the launch of its second fund, MBF has acquired more than 30 businesses across five portfolio companies, and is continuing to search for both platform and add-on acquisitions in various sectors, including post-acute care and home-based provider services. The firm invests in healthcare entities that have yet to reach their growth potential, and the add-on deals have helped MBF’s portfolio companies scale up both geographically and financially, in a relatively short period of time.

We recently spoke with Weber about his firm, and the experience, process, and philosophy that propels MBF forward.

What do you believe distinguishes MBF in this crowded healthcare marketplace?

JW: What’s different about MBF is that we have a group of co-founders — Mike Fernandez, Marcio Cabrera, and Jorge Rico — who had no prior private equity experience. They were operators and entrepreneurs of healthcare companies when they started MBF. We are operationally focused, and we look at everything with an operational lens. Let’s build it with the right people and processes in place — and excel in day-to-day execution while we scale.

How does this operating experience help MBF build a solid investment portfolio?

JW: It allows us to relate to founders and executives at a different level. That’s first and foremost. We’ve been in their shoes and understand what it takes to build a great company. Business is dynamic, plans change, and sometimes you need to adapt or pivot, especially when growth is a priority. Every company we’re building, we’re building it to last. We also collaborate intimately with the management teams of our companies at a very early stage. That is part of our DNA. We’re comfortable being in the trenches, participating in operational decisions, and providing support and guidance to management teams when needed. That experience has also allowed us to build a broad network in the healthcare space — not just with executives and operators, but with payers and providers as well – and we tap into that network regularly to find investment opportunities.

Who are your investors?

JW: We don’t have institutional capital and our founding partners make up most of our investment capital. There’s a lot of discipline when you’re investing your own money, and that’s what partially drives our investment decisions. We stick to what we know, where we can add value, and we believe in the power of partnership.

How do you encourage owners of healthcare practices and other entities to sell? 

JW: People value transparency and authenticity, not persuasion. Persuasion is short-lived if you can’t uphold your promises. In many situations, we just tell our story and then spend more time talking about the partnership and what we may be able to accomplish together. We spend a lot of time getting in front of decision makers — founders, owners, and clinicians — and this includes cold calling, mailing campaigns, attending conferences, and tapping our broker, banker, and executive network. We approach these conversations and say, “Let’s figure out how we can find a solution for your issues, and help develop your people, improve your services, and expand your access to care.” 

Why did you focus on the autism services and hospice areas?

JW: There is a lot of unmet demand in both of those sectors, and both are offering a highly important service. With end-of-life care, you are guiding patients through the final stages of their lives. It’s hard to think of a more vulnerable moment and there’s an opportunity to do this gracefully. When you think about autism services, ABA therapy can make an impact on a child’s life and can open up an entirely new set of opportunities for that child’s future. There are huge access-to-care issues in the autism space, so meeting the demand, and doing it in a high-quality way was important to us. These sectors are also highly fragmented and developing an acquisition strategy that could lend itself to growth was a real opportunity.

Where does MBF see opportunity today?

JW: We see opportunity across a variety of sectors: outpatient behavioral health, post-acute care, animal health, managed care, payer services, therapy services and disease management, to name a few. What matters to us is that we have a great operator that we can support, a clear path for growth, and an opportunity to create a differentiated service.

You have done countless add-on acquisitions. Is this your strategy?

JW: It’s part of our strategy. We see a winning combination when we can augment the organic growth of our portfolio companies with add-on acquisitions or de novo growth opportunities. We’ll do an acquisition to enter a new market… and then build a growth plan around that acquisition. Making sure that everyone is talking to each other and has clarity around the vision and mission is critical.

What trends are you seeing today in healthcare M&A activity?

JW: One is that private equity firms seem to be more open to extending hold periods for portfolio companies that still have reasonable room to grow. In today’s environment, it is harder to find operators to back and companies that are reasonably priced because there’s so much competition, so sometimes it makes sense to continue investing and growing, even in an attractive seller’s market. People are also getting more creative, and there’s more openness to going down-market in terms of the size of an initial investment. That’s where we can create value, quite frankly. We find assets that still need infrastructure, and that’s a good point of entry for us.

What has been MBF’s most memorable recent deal, in your opinion?

JW: In August of 2020 Acorn Health acquired a group of companies operating primarily in the mid-Atlantic. This was a transformational deal for Acorn and I’d been following this asset for nearly two years. Planes were still grounded due to COVID when Acorn’s management team started diligence in May of that year, so most of the diligence had to be done virtually or via road trips. Running this process as the company was managing its own operations during such a tumultuous time was a big test, but we made it to the other side.

What inspires you in this business?

JW: At MBF, the culture of the firm is so strong. It is fast-paced, family-oriented, and supportive. And when we can make a positive impact on people’s lives, it’s extremely meaningful. Whenever we make an investment decision or develop a thesis, how we are going to create a better service must be part of the equation.