After years of dormancy, mergers and acquisitions activity in the locum tenens staffing segment began perking up shortly before the COVID-19 pandemic. In the pandemic’s throes, M&A activity stalled briefly, but today, in the post-pandemic era, it’s rocking and rolling.
Before locums got hot, travel nurse staffing was the Big Thing. With the nurse staffing segment cratering, its locums’ turn in the spotlight. Locum tenens has become the goose that lays golden eggs for investors thanks to the limited supply of, and wildly increased demand for, temporary physicians, nurse practitioners, and physician assistants.
Cue the obligatory timeline to prove the thesis:
- April 2020: Doximity acquires THMED, renaming it as Curative.
- October 2022: Cross Country Healthcare wins Mint Medical Physician Staffing and Lotus Medical Staffing.
- September 2023: Sumo Medical bows to Acacium Group, a London-based healthcare and clinical staffing provider.
- October 2023: AMN Healthcare BOGOs Medical Search International and DRW Healthcare Staffing.
- November 2023: Epic Staffing Group scores SBG Healthcare
These deals had a common denominator: Nolan & Associates advised on all five. More specifically, one locum tenens M&A expert – Brett Pantazi, Partner at Nolan – advised on those deals. If Pantazi was flying under the radar earlier this year, that can no longer be said.
As Pantazi told us, Nolan & Associates is a boutique investment firm specializing in “middle-market” transactions valued between $10 million and $500 million. The firm offers sell-side and buy-side M&A advisory services. Nolan tailors its advisory solutions to cover various business ventures from aerospace to agriculture — the firm’s Midwestern roots — software, B2B, and healthcare services. Pantazi and his team were pivotal in the five locums deals mentioned above.
Pantazi started working in locums after having success in the nurse and physician software industry. He has advised many of the leading players in physician staffing, including PracticeMatch (now part of M3 USA), Lucidity (now part of Caliber Healthcare Solutions), ALD (now part of Health eCareers), Doximity, and others he cannot disclose.
Helping Locums Businesses Meet Their Goals
Locum tenens isn’t exactly well-known in the investment biz. So, how did Pantazi carve out this niche for Nolan?
The firm was founded way back in 1976, a few years before the locum tenens staffing model was conceived. Before coming to Nolan in 2009, Pantazi had spent the first decade of his career in large institutional investment banking firms, where he focused on healthcare. Pantazi enjoyed the work, but he feared losing what had made this career choice so exciting for him when he started 23 years ago.
“At the height of the financial crisis back in 2009, my current partner, Patrick Nolan, approached me and said, “Hey, we’ve got a small M&A boutique, and we want to open a St. Louis office. Do you want to join me?’” Pantazi says. “I had worked on multi-billion dollar financial transactions and wanted to work in the middle market where our advisory services are more valuable to sellers. When working for large, publicly held companies, M&A services became a commodity.
“I wanted to drive value for the entrepreneurs who created businesses and help them reach their goals. I wanted to roll my sleeves up and work with business owners to help them achieve what is likely the most important economic event of their lives. In 2009, we were young enough – and dumb enough – in the height of the financial crisis to open an office for Nolan investment banking. We had two people in St. Louis at the time — Patrick and myself.”
Fast forward 14 years, and the St. Louis office has grown to 16 employees. The firm has even expanded into Portland, Kansas City, and Chicago.
Turning to Locums to Meet Demand
What’s behind the flurry of locum tenens deals in Pantazi’s eyes?
COVID-19 led to revenue growth in travel nursing and allied health, resulting in significant M&A activity in those segments. He says that for the first six to 12 months of the pandemic, locum tenens agencies outside of triage zones saw decreased demand for physicians and advanced practice providers.
However, as COVID-19 triage subsided, healthcare facilities had a healthy backlog of surgeries and procedures with fewer physicians and APPs because of attrition from the pandemic. Locums firms re-started their growth curves and began experiencing a greater appetite for acquisitions.
The nursing and allied health segments have normalized in recent years as revenue has dropped from the record highs reported two years ago, during the pandemic’s apex. However, as the physician shortage crisis presses on, investors have pivoted.
Pantazi says locum tenens was already attractive before the pandemic. Yet, post-pandemic, investors and buyers showed enthusiasm because of the industry’s supply and demand imbalance and the recession-resistant factor within temporary physician staffing.
The locum tenens market is truly unique; it’s one Pantazi says has a lot of “stickiness” with growth projections that have investors champing at the bit. Further, a significant influx of cash entered the market, raising greater industry awareness. In 2021, Nolan started getting phone calls from locums firms, private equity investors, nurse staffing firms, and tech-enabled service providers interested in buying up their locums clients.
“We have fairly good brand recognition in the market today and histories with the universe of locums buyers,” Pantazi says. We do our best to maintain relationships with locums firms to understand their goals and objectives better. We also advise them on the front end so they drive enterprise value.
Pantazi expects the locums market to grow seven to 10% over the next three years, claiming that while the market is still fragmented, more transactions will bring more financial sponsors to the locum tenens industry.
“The attractive thing about this market is that so many growing $10-25 million businesses have great organizations poised to backfill the market,” Pantazi says. “It’s fun and exciting to be a part of it, no doubt about it.”
The Nolan & Associates M&A Process
During its 46 years, Nolan & Associates has completed over 600 transactions. The firm has global experience helping clients find strategic or private equity partners to facilitate a successful “liquidity event” — a transaction such as a merger or acquisition.
Pantazi often advises clients on making their firms more marketable to a financial sponsor, advocating for a diversified client and producer base, building strong management teams, and grooming them to continue profitable growth post-acquisition. Pantazi also advises locum tenens clients on compliance-related matters related to W-2 vs. 1099 providers, state sales tax risks, and how to avoid medical malpractice burdens as part of a transaction.
Long before a completed transaction, Pantazi and the team do their financial, operational, and legal due diligence. Once complete, Nolan creates a “confidential information memorandum” (CIM), which Pantazi says is a document that gives buyers and investors the information they need to make a first-round bid for the company.
“We want to make sure we understand all the good and all the bad,” Pantazi explains. “Think of it like we’re telling a story: here’s who we are, why we’re growing, and why we’re different in the market.”
After each buyer is “Nolan-qualified,” Pantazi says the firm requires buyers to sign a non-disclosure agreement. Once the NDA is in place, Nolan releases the CIM, and the client is officially ”in market.”
Pantazi worked with clients that had anywhere from 10 to 250 potential buyers and investors on their list. They customize each sell-side engagement to fit the client’s goals and objectives. He says the total client engagement from introduction to acquisition can take six to nine months.
“We customize our process for our clients. We tell them we’ve done work with all these people, and based on our experience, we advise our clients on who has the best chance of winning their process,” Pantazi says. “We only allow client-approved buyers in our sale process. Competitive dynamics or other sensitivities often disqualify certain buyers.”
Nolan & Associates acts as each client’s advocate in the market, selling the opportunity to potential buyers. Pantazi handles calls, data requests, and anything else.
“After we’re in the market, we run buyers through several rounds of bidding to identify the best candidates,” Pantazi explains. “Then, at the end of the bidding process, clients meet face-to-face, break bread, conduct interviews, and are allowed to pick from the best and most qualified bids.”
Pantazi first moved to Nolan because he was losing what he loved about investment banking. It’s safe to say he’s regained his mojo. During that two-decade-long journey, Pantazi latched on to something “fun and exciting” and has no plans of letting go.
The foresight of Nolan & Associates and Pantazi’s extensive experience in healthcare has helped position the firm as a pivotal player in the healthcare industry for years to come, making Pantazi practically a household name among locums agency owners.
