12 – Healthcare Capital Markets Deep Dive with Grant Chamberlain of Ziegler

Vic: [00:00:00] Welcome everyone to Health Further Without Marcus. He is off vacationing with his wife in an undisclosed location. And so I’m trying to carry the ball without him. Excited to have Grant Chamberlain of Ziggler here. Grant, thanks for doing this with me and filling in. Appreciate it. No, I’m really

Grant Chamberlain: excited about this.

Thank you.

Vic: So we have had a ton of growth over the last several episodes. And so I think it makes sense to sort of quickly touch on, uh, health further, why I started it and then why I wanted to have you on as a, as a guest here this week with Marcus out of town. I think you may know this, but a lot of listeners are new.

And so Marcus and I, you know, been VCs for a long time. We were really searching for a podcast that would help us understand the VC market in [00:01:00] healthcare in the context of. The overall kind of incumbent industry policy, what the federal government is doing, of course, really drives a lot in health care and capital markets, uh, starting with venture, but then IPO markets, M and a markets and large public companies all the way up to, uh, the federal reserve and macroeconomics.

And then we couldn’t find that we were both like piecing together various different podcasts, but of course they don’t give the overall context Uh, and the point was really just to learn for ourselves. And so we started this show, I think it was 15 weeks ago, maybe 14 weeks ago. And it’s been really fun for me.

I’ve sort of been forced to learn, get my act together, to talk to an expert like you. Uh, but surprisingly the listeners have really taken off. And so it’s, we’ve had incredible growth. I think the key is that all these things all intertwine together and they affect each other. And [00:02:00] I’m excited to have Ziegler on because we’ve had a couple other guests.

Our first guest was Emily Evans, who’s really a deep expert in policy. Then we have David. Two weeks ago when I was out talking about the healthcare industry, uh, we had an innovator on, but we haven’t had a capital markets expert as a guest. So, uh, Grant, you are the first. You’re our best by far. Head insurer is above any other capital markets experts we’ve had.

Super excited to have you on. Thanks for doing this.

Grant Chamberlain: Oh, absolutely. Thank you. And I need to apologize at first because I listened to Dave Johnson’s interview before, and I’m going to give it a fairly obnoxiously long introduction, but it will tie thematically to everything we’re going to be going through here.

I

Vic: want, I want you to talk about your personal background and then also how Ziegler fits in because Ziegler, Similar to the company Marcus and I started really has a long history in the incumbent industry, but now has [00:03:00] done a lot of banking and innovation. So yes, talk about yourself and Ziggler.

Grant Chamberlain: No, absolutely.

And by definition, it’s going to, it’s going to loop right to Ziggler as part of that. transition. I’m going to, I’m going to touch on, you’re going to hear sort of three themes that I’ll transition through from the beginning end of my, my pathway, my career. And initially you’ll understand how they tie together when I’m done.

House calls that physicians used to do, turnarounds and workouts, And innovation and disruption. Um, my, my father was a MD. He’s now 96, still alive. Um, he was an internist in Milwaukee. He was at the top of his career. He was chief of staff of one of the biggest hospitals in Milwaukee. Uh, he was practicing in Switzerland, continue to reverse as a glory days of my medicine.

I watched him in the seventies as one of the most respected professions, you know, the medicine was at, at that point in time. And interestingly, he did. [00:04:00] You know, two to three house calls a week on his way home, you know, all the time. I used to watch this, my friends and families who he was a doctor to many of them would always say my father’s stuff.

I just think, well, that’s, you know, it was sort of a cool thing. I never really thought about

Vic: it. What was his specialty? He was an internal medicine, he

Grant Chamberlain: was an internal medicine specialist. He was incredibly, he graduated number one out of market medical school. He was on the medical, he was on the board of the medical college of Wisconsin.

So he was a revered He was, he was actually the, the, uh, doctor for Miller Brewery for the Bucks, the Brewers, Bob Euchre was a, Bob Euchre was a patient of his. I was

Vic: watching him. Timeframe. I agree. That timeframe, I mean, that’s 67 is when HCA started, but the seventies where we’re really, uh,

Grant Chamberlain: You’re getting, you’re getting to my punchline here. Uh, so from age, from age 10 to 20, without question, there was no question in my mind, I was going to [00:05:00] be a doctor, but I was from, from zero to 10, I was going to be an NBA basketball player, but from 10 to 20, I was going to be a doctor. And as, cause I watched the profession.

I watched the sort of the glory of what he was doing. I also started in, when I went to Matt, I went to university, Wisconsin pre med. And when you’re a dude, suck me up, I didn’t. Organic chem, cellular biology, did all of that. Uh, but interestingly, I had, I had a spinal fusion done between my. Sophomore junior year in college.

And I was at the same time I was, I was, I had begun to be, I was doing an internship at Blunt Ellison Lowy, which was a broker dealer in Milwaukee. And it was when the markets were exploding and I was, it was watching. I actually ran on the floor. This is 86 and 87,

Vic: 87 or whatever

Grant Chamberlain: you’re, you’re, you’re, again, you’re, you’re cheating.

You’re [00:06:00] getting my punchline here. So, you know, what was, what I was watching though, as I went in at that time, I had spinal fusion, I was in the hospital for a fairly long period of time. Yeah. That’s a serious operation for a college kid. Yes. But I was starting to see both my father’s business. And his aptitude and desire for medicine, as well as all these young physicians, because managed care was just becoming HMOs and managed care was just entering the market at that time.

And I was watching him, you know, his practice, and then I was watching him talking to these young, young doctors while I was in the hospital. And I said, you know, they’re really kind of miserable. The by definition was watching the transition from becoming a profession to a business. Healthcare was transitioning to become a business.

And I, and I was at this broker dealer and I was like, I approached my father during the summer of, before my junior year. I said, dad, I think I’m going to, I’m going to, Leave [00:07:00] pre med and go into the business school. And as you can imagine, he was a bit crushed, but I, I said, I know I, I, I see all these guys working their tail off and they’re really not happy.

I mean, it wasn’t about money because you know, at that time, internists are still doing

Vic: okay,

Grant Chamberlain: but I should, I didn’t have to spend that much time to 30. And walk out and be unhappy. The business purpose is what I was watching you with the glory of what your practice was. I, so I stepped away from it and I went into the business school at university of Wisconsin.

My first job out of college was at GE capital. In their corporate finance group and, and GE Capital’s Corporate Finance group, <CROSSTALK>

Vic: training platform. In

Grant Chamberlain: the, in the, in the late, in the late eighties, the CAP Corporate finance group was the single biggest provider of, of debt to the LBO and the MBO cra.

They were funding all the fund money going into the space and we’re gonna go back [00:08:00] sort of thematically very well. And

Vic: they really, they really did a good job of training new, new college grads. I mean, they were

Grant Chamberlain: GE was at that time under Welch, all aspects of it. I tell people all the time I got my MBA at GE, whether it was the G capital, the corporate finance group and the financial manager program.

It, it was great learning routes, but it was the uniqueness of the sort of where that period was, is GE was. Pounding capital into the marketplace during that time, in all honesty, very similar to today. This is where we’re going to come full circle at very inflated valuations with way too much debt going into these companies.

And so I was at the front end, an auditor and analysts. Into the money going into the system and then you brought Black Friday all of a sudden the market flipped on its head And I was and I was doing exceedingly. Well, I was one of 50 analysts I had one analyst of the year a couple years in a row And they asked me to join the workout and turnaround team because all [00:09:00] in a period of one year Ge’s, you know That was

Vic: yeah,

Grant Chamberlain: all the work

Vic: was in feeding money in and then I mean the beauty of ge All in the work flips.

Yeah

Grant Chamberlain: It is. And it was, it was a wonderful, I’ll tell, I’ll tell people, all my analysts and people I’ve talked to about what was a more formative years of my career. Workouts and turnarounds, hands down. You learn everything about a company in an industry. Uh, what are the levers that drive, you know, whether success or failure, and how can you step out of, you know, a point of distress, so I, I worked in the workout group at GE capitals, corporate finance group, and interestingly, and this is where we’re going to get to healthcare.

I got a call from GE Medical Systems. I had been doing very well early in that stage of my career. And GE Medical Systems in the early nineties had essentially created an entire industry in the imaging center space. They were financing, they were pouring [00:10:00] capital into it, created essentially. Six or seven different public companies by dumping cash into driving CTs and MRIs, mobile and fixed site and imaging centers.

And they also

Vic: sold the hardware.

Grant Chamberlain: I mean, the beauty of the hardware, they financed it.

Vic: They massively.

Grant Chamberlain: So GE was. Fire away the leader in the space and in a period of about six months, the imaging industry crashed because the reimbursement for in 1990, 91, the, it was very simple reimbursement for an MRI went from 2, 500 down to about 1, 100.

Almost overnight because the, the payers said, wait, wait a second. We’ve got way too much equipment out to the utilization was going through the roof. They said, no, no, no, no, no. We got to slow this down. And so all of a [00:11:00] sudden GE had over a billion dollars investment into the space. And they called me and says, Grant, can you help us work out of this?

And actually I, from 91 to 95. I went to GE medical systems. I helped them turn around and stay. I actually kept all the parties out of bankruptcy, which was, which was wonderful. Um, but I, but I used every lever inside of GE and these a lot

Vic: of negotiation and horse trading and debates. Yeah.

Grant Chamberlain: And a lot of tools to use a GE between whether it’s service equipment.

Upgrades and otherwise to sort of keep these companies healthy. Because I told you, you know, they can’t let these companies go bankrupt because if you have all this hardware hit the street, it would be a disaster, but that was, that was sort of a wonderful formative educational period. And it was really where I learned some of the foundational attributes of where health was going and still GE at the, at that time, even was at the beginning stages of their revenue cycle, EMR.[00:12:00]

Efforts and bringing best practices to their clients. Well, interestingly, I thought I was going to have a GE meatball tattooed to me for the rest of my life. Um, as everyone was doing very well. And at that time when Welch was there, the stock was splitting every three years. So the company was, was doing exceedingly well.

And I, I had a, I had a fair amount. Probably the best,

Vic: maybe the best company in the world. Early nineties. Yeah.

Grant Chamberlain: Unquestionably. It was, it was, it was a great learning experience and again, great training experts know that they would throw at you all the time, but interestingly, I had, I got a call from my boss, both guy into a G capital and he’d called me.

You know, I joined at GE medical systems, had left GE to join an early stage middle market investment game called Shattuck Hammett partners. And, and, and Shattuck Hammett partners was really unique because they were sort of similar to Ziegler at that time. At the forefront of [00:13:00] hospital financing, hospital bond financing.

Uh, so they had Sharp, Mayo, Scripps, laundered lists of some of the best brand name health systems that they were doing the, the bond financing for. And yeah, and Ziegler,

Vic: maybe a couple others. There only are three or four that really do a significant number.

Grant Chamberlain: That that’s, that’s right. And so, but interestingly, so he called me and he said, Grant, Partners needs you.

He said, no, they need a corporate banker who actually understands where the evolution of where imaging centers, surgery centers, physician practice management, because all these health systems are trying to figure out the next generation of where they were heading. So I, I had zero expectation that I was going to go and invest in banking.

I actually didn’t even truly know what. And then, you know, investment banking was other than capital formation and M and a, and I flew out, I told my wife, I was flying out to New York to [00:14:00] visit. Uh,

Vic: yeah.

Grant Chamberlain: And I ended up going there and setting it became, you know, early on in my career, you know, started to do deals and I, and I took the job, moved my wife to New York city, um, and spent four years from Milwaukee,

Vic: Milwaukee,

Grant Chamberlain: Milwaukee.

Vic: Was she okay with that? Was she excited or not?

Grant Chamberlain: It was an adventure. It was, it was, it was, she, she, she did it. Uh, but I will

Vic: tell

Grant Chamberlain: you four years later, she, I came back, but it was an interesting time because it started to create the formation of sort of where we’re going to go as part of this trans discussion now of where digital health and telehealth become sort of a fabric of my current practice, but I spent, I did.

A number of deals in the surgery center space. I did actually from the first deal I did when I left was I resolved my problem. Last problem children I had at medical systems, which were two imaging centers and mobile imaging companies [00:15:00] that were public. And squished them together, got GE to take a 48 position, 48 percent position and converting their debt to equity.

And, you know, did a poof transaction with them to create insight health services. I actually joined the board in my early Thursday was the finance committee chair, and we brought the Kyle group in and ultimately sold the JW childs and took a 5 stock and sold it at 18. And it was a wonderful transition, but it was, it gave me a wonderful, wonderful lens into the space.

But as part of that time, I started to do deals. Because she had a cam and really didn’t have corporate banks at the time, except myself and a couple others, but I did imaging center deals, surgery center deals, but I really started to do, you know, I probably did as many practice management deals to five core med partners.

FPA is almost any banker. And then at about four years later, unwound them all. Um, and

Vic: just connecting our story, five core was a big messy birch where I, where I learned venture. Five core is a big messy birch success. Paid a lot of [00:16:00] banking fees, bought up hundreds, maybe thousands of practice groups, but then it all got reversed.

To the reverse,

Grant Chamberlain: but it taught me a handful of things. And actually the thesis of MedPartners and Viacore wasn’t wrong. It was, they didn’t have the tool sets yet to manage risk because the whole, the whole premise of what MedPartners wanted to be was create tools and technology to enable physicians to take risk.

And the, and the. Systems weren’t there yet. Now, so I did a lot of deals and it is a number of deals in the healthcare it space as well, early on it. And a lot of them in the content space. What, and this is actually,

Vic: that was the internet. I mean, the

Grant Chamberlain: beginning of the internet, we’re going to get there. So, so really part of that, where this is going to go, this really relevant is I started to do a bunch of deals in the content and the evidence based medicine space, because I realized the tools, technologies that we’re lacking in the.

In the practice management space [00:17:00] was how do we bring things that can help people manage risk? So I did, you know, I sold e medicine to WebMD. Then I did the Zynx transaction. The Zynx transaction, if you don’t know, was spun out of Cedar Sinai. It now resides inside of Hearst. Dr. Scott Weingart was the, I still say the godfather of evidence based medicine.

And the four leaders of that group today are four of the leading principles in healthcare broadly in the marketplace. Josh Hoffman is at Grail. Dr. David Rue is, Dr. David Rue is the chief medical officer of Microsoft. Um, Greg Dorn still is the president of Hearst Health. Hearst Health is Zynk’s first databank and all of, you know, All the attributes, they were the one like, but they were really leaders.

But what I saw at that time was. That we needed to find a place for trusted content and trusted conduct. Zinx was really deeply seated, evidence based medicine [00:18:00] content that brought into the space. So, so that, that was, you know, that was a first border in me. And then I, then I, my, my timeline in the practice management space, all the lessons learned I got from the practice management space brought me to oncology.

I started to do a couple of deals in the practice management space oncology. And I came to realize that one of the long, you know, all the attributes of work. Thought to have brought into practice management, whether they’re single specialty pathology, imaging, or otherwise, oncology is the perfect wet lab for what a practice managers, whether it is drug purchasing equipment, purchasing, but more importantly, managing risk today through oncology care management, but honestly, Bring stepping into clinical trials, community based practices, can never compete with academic medical centers unless you have a management company.

So I’ve now, since then, I took all the lessons learned from the nineties and I’ve done over 25 deals in [00:19:00] the oncology practice management space. Honestly, most of them to us oncology, but I was the banker that was part of the formation of us oncology between AOR and PRN. But a lot of those themes really sort of build to where we’re going into telehealth and digital health, which is, those are how do you manage and navigate workforce more efficiently?

How do you give them the tools and technologies to navigate the flow of, of, of content and, and there’s no place that’s needed more than oncology because it’s just such an incredibly complex set of solutions.

Vic: It’s complex. It’s life and death and it changes. A lot. It does.

Grant Chamberlain: It does. So, so, so from there, I got a call while I was working in the digital health space early on.

I got a call from a company in Texas from called Airstrip and Airstrip was still today to me. One of the Best single use cases and representations of what digital health and telehealth is, which was the

Vic: first big success in [00:20:00] digital health.

Grant Chamberlain: And that was, and that was, that’s what put me on the map because during that process in the, at that time, so it was very simple use case for high risk pregnancies, you know, on a BlackBerry phone at the time when we started the process, you could see mother’s heartbeat, baby’s heartbeat, contraction patterns.

No real time transferred to a black or phones. So when a, a, a mother and nurse and an old B weren’t proximate to each other, she could communicate with them and say, and, you know, when my mother was in distress, say, One, get her, get her into surgery. I’ll be right there. Or don’t worry about it. That’s a pattern I’ve seen before.

It’s fine. Yeah. Wonderful. So pre

Vic: pre iPhone, pre Facebook, it was the first like really breakthrough. In, uh, I mean, financial impact, really successful financially, but also health impact, health, health, tons of moms and [00:21:00] babies, uh, either not worry or get into the ER now, it, it,

Grant Chamberlain: it, absolutely. It was, but it was again, to me, one of the great simple use cases.

Of what remote patient monitoring, what was doing, what the impact of having simple, easy to use solutions to access, you know, a mother and patient, somebody who weren’t proximate to each other, near each other to, to resolve a problem. Binary. Yeah. Great. So it was, it was a great solution. And, but the beauty of the, my life and timing was the iPhone came out that year and Steve Jobs stood up on the worldwide development stage with the two founders of Airstrip standing behind them.

WW, you know, the world of development conference, number one, and he had the two of them standing and he held the iPhone up and he said, here’s how we’re changing healthcare and we’re saving babies lives. And they told us ahead of time, we’re going to blow up your server. And they did. Right.

Vic: Right. Right.

Grant Chamberlain: But also they blew up the process that I was running [00:22:00] through and it was wonderful. All of a sudden I suddenly had GE, Philips, Qualcomm, Siemens, Intel,

Vic: all

Grant Chamberlain: chasing this asset. And ultimately Sequoia and Kleiner. Chase the acid and Sequoia ended up clearing the table and it had a wonderful valuation from a banker’s perspective, but I back to, we’re going to go through, you know, a very high valuation at the time, but they wanted to be at the forefront of this.

So they learned a lot from, but during that process, I essentially had G E Phillips, Siemens, Qualcomm. Selling my team and the Airstrip team on where and why they should be part of that franchise. They gave us their playbook of where they were going in remote and remote patient monitoring and where they were going.

And so

Vic: you’re one, you’re helping the Airstrip, but two, you’re gathering this Intel of what everyone’s plans are at like the point when healthcare went from trying to figure it out to now there’s a platform, the iPhone, that, [00:23:00] that can really enable this at scale.

Grant Chamberlain: Yep. No, no question. That’s, that’s, that’s exactly right.

So I suddenly stepped back and then I had seen into where all of those organizations, Qualcomm, Intel, GE, Philips, Siemens were going over the next 10 years, I stepped back and I actually put up on my bio M health banker at that time, telehealth wasn’t referred to as just M health. So there was. Digital health at that time, I said, I’m going to be the first M health banker.

And because I had sort of closed this very sexually highly visible deal. Yes. And, and, and then in one, and on my business and your business deal deals, baguette deals, and I started to see a lot of transactions and it was really where I started to recognize the need for research and content. I want to differentiate myself by publishing research.

And we’ll, we’ll speak about that. You know, Later in this discussion, we’ve now published multiple white [00:24:00] papers on the telehealth space, the digital space, and some of them become really some of the seminal work. So I want to

Vic: get to Ziegler and the research of it, but I just want to point out for the audience that this is why I wanted to have you on it.

The details of a transaction, right? Like, and we’ll talk about market pricing and maybe we’ll talk about sort of how many prospects you go, how you run a process to try to get everyone to the finish line at the same time. That’s valuable. And in my opinion, every banker does it pretty well, right? Everyone has the data.

Everyone has a log in a pitch book and can gather the information. Uh, but that in industry knowledge, um, of where it is today and where it’s going and how all the big players. Providers, health systems, payers, the federal government, digital health, how all that’s coming together and where it’s going to go.

That’s what you can really create incredible value in. And the research is sort of

Grant Chamberlain: part of that. [00:25:00] It is. So I, so I created a sector map in my first white paper. Eight years ago, it started to sort of untangle the space into digestible bites. So it was, it was a early paper that said, here’s a lens to look at the digital health space in, in quantity where, because the value proposition, both reimbursement stakeholders and, and channel partners for.

Urgent care, you know, Teladoc, you know, solutions versus, you know, a tele ICU or telestroke versus nurse communications versus senior living versus behavioral health. They’re in totally different use cases, totally different channel partners, totally different payers. So I tried to untangle it in a, in a, in, in a more digest.

Well, for,

Vic: for you, for you with your team and your partners, and then with your clients, defining what you mean by different terminology. This is what we mean by. ICU telehealth. This is what we mean by [00:26:00] direct consumer, et cetera, advanced practice, telehealth, different categories. You might then debate where companies go, but that’s where the magic is.

Like that’s where you really get the learning. Like, okay, the map’s not the territory, right? The research paper is the tool we’re using to try to understand this landscape, but debating over how to interpret this landscape, how do we map it? That’s where the really insights come in.

Grant Chamberlain: That’s right. And we’ll talk about, and the first paper had 140 companies in the last one, the fourth one we just published this year at 832 companies.

So it just, it shows the breadth. Okay. So

Vic: let’s talk about, I know you brought a couple of slides. Let’s talk about Ziggler. Ziggler, you have a wealth of experience, but then Ziggler, uh, multiplies that there’s so much, uh, resources there.

Grant Chamberlain: It does. And it’s going to play off a very similar theme as to how I went from GE to [00:27:00] Shanna Kamen, you know, Ziggler to me is sort of the perfect.

Conclusion of, of all of that career because one of my partners that I was, had, was working with at, at the time at Raymond James called me, knew my professor, Chris Rogers called me up and says, grant, you need to join. You need to come and see . Yeah, you gotta come

Vic: right.

Grant Chamberlain: You need to come and see Ziegler. He said, you know your skillset and where you are.

So you said, you know, Neil Borg has assembled, accumulated some of the best sector experts in their areas, whether it’s behavioral health, whether it is senior living, whether it is physician practice management, whether it’s home and community services, we have, you know, I’m a very, I’m as deep expert as in the digital health and telehealth space in each one of those sectors, you know, Neil,

Vic: Chris is really good at behavioral health.

Grant Chamberlain: No, no, no. Well, Chris Rogers is unquestionably the leader in the home and in behavioral health and autism rights. [00:28:00] Chris Hendrickson is on many association boards as well and is leading the home and community services and home health. Andy Colbert is one of the most prolific bankers I’ve ever seen in my life in the practice management space.

Whether it’s radiology, anesthesiology. Oncology continuation, you know, uh, pathology. We are, we’re at the front edge of that. Neil Borg and, and Mark Turco are leading our. Um, revenue cycle and performance improvement practices. Patrick Walsh leads the efforts in lab and, uh, clinical trials and, and pharma services.

So we have a wonderful, so Chris, this place is made for you. And it’s, it’s, it is a wonderful culture. And the best thing about it is. There’s zero sharp elbows. You know, there’s a, there’s a, there’s an organization that collaborates at the top end for all the deals to bring the absolutely the best resources to bear for the clients.

And so. You know, Chris [00:29:00] brought me and I joined and I, and I left and I could not be happier, but I think go, go, go to the slides. It’s not the

Vic: biggest bang. It’s the best bang, right? Like, and I don’t think, I don’t think you or Dan or any of the leadership at Ziegler is trying to be, can you see this now? So for the listeners that we have about.

About a third to 40 percent of the listeners are watching. Uh, but look, we need to talk through this too, cause I have some people that are on a jog right now, or they’re maybe driving in their car. So this is the Ziegler Advantage kind of at a high level and talk through a Ziegler, what you, what you joined and what, what the company is.

Grant Chamberlain: Yeah. And so Ziegler is 100 percent healthcare investment bank. So, you know, the beauty is that the firm is still privately owned. Roots all the way back to 1902. It’s what is one of the last, one of the longest tenured investment banks, 100 percent healthcare that has been in its legacy has been doing hospital and post [00:30:00] acute senior living, bond financing, and M and a.

Plus Neil Borg created, you know, and it has 190 professionals, over 60 managing directors and 20 offices nationally does MNA and capital markets work and actually has a subset, you know, group that does some proprietary investing in early stage health care and senior living physician facility. Um, So

Vic: it’s like, it’s a healthcare banking expertise, although it’s not as big as some of the Bulge bracket firms, 20 offices, 190 people.

It’s a significant

Grant Chamberlain: institution. I will tell you in, in the middle and lower middle market banks, because again, we do, we do everything in healthcare services, technologies, and IT. So view us, we, you know, we do everything but life sciences and, and devices, everything surrounding that. So in that sphere, I don’t think we’re, if not the biggest, one of the biggest [00:31:00] banks that does capital formation and M& A.

broadly in the healthcare services space.

Vic: And then this one is sort of some of the transactions. Talk through this slide.

Grant Chamberlain: So, so, so again, when I joined the group, so Neil Borg started the Pratt, similar to sort of by entry into, into Shannon Hammond, Neil became the leader and solicited the group saying, I want to create a corporate finance practice here inside of Ziegler that will begin to leverage this long hundred year legacy.

So he, he brought. The group of participants that I was referred to in to sort of form this practice. And we now have it just, just in the corporate finance M& A practice that does what I do. You know, there’s 45 percentials, uh, 10 MDs that, you know, do some of what I think are the most impactful transactions across The healthcare services landscape with, you know, with some of the [00:32:00] biggest brand name counterparties that you see around the, whether it’s Phillips or medac, or UPMC and Centene the world to some of the biggest brand name private equity and, and venture capital firms.

You know, we are, we are doing, you know, 50 plus transactions a year in this space. Uh, and, and I, and as you’ll see in the next couple pages here, some of the most impactful deals in the space. So that, so yeah.

Vic: So here, here are some deals. Yeah.

Grant Chamberlain: So, you know, so this is, this is, you know, if you think about sort of what I described, you know, I view it as, you know, we do some of the leading deals in the navigation and access in space, a lot of deals in the telehealth and the remote patient monitoring space, tremendous amount of deals in the member engagement and patient access space.

And in the, in most recently, the last several deals, Ziegler has done the market changing transactions in the value based care and population health space. So there’s a whole series of deals that you see on this page that [00:33:00] others can see afterward, but it, you know, we have, we’ve been, you know, similar to my practice about disruption and innovation.

We are at the tip of the spear of doing some of the more innovative deals in the space.

Vic: Yeah. And I think the categories are really the key. I want to point out there’s, there’s a A focus in in really four areas that you’re highlighting here. Very active in all of them. Right? So navigation and access how to how to patients navigate the system.

How do they get access? How is that taking care of telehealth? R. P. M. Patient member engagement. I’m happy to see one of my portfolio companies. They’re cured for that. Y’all helped for that. And then the value based care and these things all fit together, but there are differences too.

Grant Chamberlain: Absolutely.

Vic: Um, so talk about your, your market presence.

This is a good slide. Uh, some people that are listening on the left hand side, as you look at it, it’s all the different places where you are. presenting, educating people, learning, [00:34:00] um, gosh, I don’t know, 20, 30 different events. But more important to me is the deep dive research. So talk about this slide.

Grant Chamberlain: Yeah. So, and again, so we, we are very active in, you know, all the leading associations, certainly, you know, Ziegler in the senior living space is, you know, the, Anchor tenant or sponsor to many of the large associations in the senior living space. And that we are also very active in a number of the, you know, the, what I would think sort of forward leaning most formative is, you know, obviously the ATA is there.

Um, I’ve been lucky enough to be probably one of the earliest and only bankers that have gone to the health evolution summit. For, you know, since its inception, I actually helped David Braylor raise his capital at care management sciences. And I actually, similar to my time, he gave my time with David gave me my PhD in terms of how content can be adjusted.

And that, that is. That’s probably

Vic: the best [00:35:00] conference and really highly curated. So being there for the year one, it’s incredible.

Grant Chamberlain: It’s been wonderful. It is. And I view it as sort of filling my buzzword bingo card off for the next 12 months of the year, because you, you, you feel in here where, where’s the puck going from the end of, because it’s a C suite only event typically, and, and so I’ve had the opportunity to go

Vic: there.

The speakers are, the speakers are good, but I always find the, the The coffee, I mean, just the way that with it, the quality of people that are there, the meetings that you have in a week.

Grant Chamberlain: Yeah, no question. And so we participate in all of we actually sponsor many of them with the lead sponsor, the A. T. A.

where we are now one of the lead sponsors of health evolution across the board here. Um, but part of the reason we’ve been asked to do that is. Ziegler is, you know, one of the most prolific, uh, participants in the space, certainly in investment banking that produces targeted focused, [00:36:00] incredibly rich, deep research papers, whether it is in the senior living space, behavioral health space, the home and community based services, the patient navigation.

And, you know, and my team has published four different white papers, um, deconstructing the telehealth space broadly. And so I

Vic: have it right here. And it’s, it’s deep. I mean, it’s, um, look right now, 40 pages and they are there, you know, there’s a lot to them. And so I keep it as a reference. I mean, it’s a great thing to read through, but then I’ll want to dive in and look up something because I’ll know the top three participants in a particular niche, but you’ll go into the 10, 12.

Grant Chamberlain: Yeah. And so what I tell people, you know, as we end this, you know, I will, I can, if somebody wants to see them, they can email me and I’ll send them a digital copy or hard copy because, you know, hard copy, as you just have is easy to do because [00:37:00] My brain works in placements. So as you see that document, when you fold it open, I, I, I rarely can do things on a simplistic way without big placements.

So, you know, this is a presentation of the four white papers that we have published over the last several years. The last one we just published, uh, and actually at the, at the ATA conference, you know, in, in March. And it, and it builds off of it and initially, you know, yeah. So just

Vic: for the audience that’s listening and not looking at it.

Ziegler does several different papers, research studies on different areas. This is, I think, the evolution of what we would call digital health today over time, starting in 2016 through 2023. Yeah. So you’re on part four or like version four of this

Grant Chamberlain: process? That, that, that’s right. And, and back to what I said before, you know, the, the, the, the paper, the, the, uh, the wonderful timing just preceding the pandemic in January at JP Morgan.

The year the pandemic came out, we published our third white [00:38:00] paper. And initially at that time we highlighted where was the pup going, behavioral health, senior living, uh, and, and, and, and de decentralized clinical trials. Was sort of a thought topic and all of those

Vic: COVID COVID accelerated all those things.

Five years happened in five months. That’s

Grant Chamberlain: exactly right. And it, and then interestingly, we published this last paper and I’ve been sort of, even in the, in the header of the one, the paper in number two and three, We, we, we sort of highlighted that we want telehealth to become just part of the fabric of healthcare.

Telehealth will just be synonymous with healthcare. And I think we’re there. And so what I, when we, when I speak to the ATA now, I talk about, telehealth really is about two things. It’s about creating unencumbered access to the most vulnerable, you know, for physical and behavioral health, to most vulnerable populations, whether it’s rural or urban.

And it’s, and it, it’s, Really is about workforce optimization. Now, how do we create tools and [00:39:00] technologies to optimize the delivery of care to the right level of licensure? And that those two ends of that spectrum almost captures everything today in telehealth and digital health is how do we create unencumbered access as seamlessly as possible?

And how do we create tools, technologies that ensures that everybody’s on top of the license, because we have such a huge workforce problem right now. And, and I think that really is. What I try to sell is where is health, telehealth going? It really is about those two core themes. And most of what we see in the, you know, in the industry today, in the market today, plays off of those two themes one way or another.

Vic: Yeah, definitely. So then within that paper, within that study, this is, I think, one of the best slides. It’s, it’s, it’s an eye chart online, uh, but it gives the entire universe of access to digital health.

Grant Chamberlain: It absolutely does.

Vic: I might zoom in. So this is the start box.

Grant Chamberlain: And [00:40:00] it’s, and I’ve, I’ve used this, this page has been in all four, all four of the documents that I continually highlight.

It

Vic: keeps getting updated and sort of building out.

Grant Chamberlain: But it, but it, it plays off of again, the same things. Um, you know, what are the characteristics of a successful program being disruptive without being disrupting? And really it plays to where, where are the key elements of that? And really there’s five factors that I sort of, I use this as a scorecard for all the companies I work with.

You know, it is, you know, what are the key elements? Is it easy to use and implement? Is it embedded within existing workflows? Does it provide analytically driven engagement? Does it filter out the noise and does it provide timely relevant feedback? Bingo, of course, but probably the most important thing of any attribute of these companies, do you have the ability to create a program champion within the organization you’re going into, whether it is a health system, whether it’s a provider, whether it’s a payer, it has to be easy.

This has to be part of the easy button [00:41:00] has to be there because the, you know, the problem with whether it was disease management, chronic care management, You know, 10 to 15 years ago was they were wonderful tools, but if they, if they didn’t work or they were difficult to use, they went in a closet or a drawer and they were never touched again.

The beauty of where we are now in telehealth to some degree because of the pandemic. It’s, you know, the, the ubiquitous of the devices and the ease of use the devices within the infrastructure and whether it is 5G or AI that has been the elixir to making that happen, we have a set of a framework now where these tools, both the payers, the physicians, the patients, and family members are all used to be during the pandemic, used to and accepting and trusting this is to me, Back to the old, old context of our value based care and evidence based medicine, this is all about trust.

And I think we’re finally at the point where people are [00:42:00] beginning to truly trust that these solutions will be part of the fabric and one of the only ways we can navigate the workforce shortages and the access to up to vulnerable populations.

Vic: Yeah. I mean, I think we all were forced from necessity to learn about using our phones, using zoom, using telehealth tools.

In the pandemic, because there was no alternative.

Grant Chamberlain: There was no, that,

Vic: that, that drove adoption in a way that nothing else could have driven adoption that quickly. It would have been impossible to, that crisis drove through everyone get up learning curve. Now the pandemic has, you know, abdell and we can use that.

Everyone has learned it. We can use that, that sort of understanding to deliver these things along the bottom here. Enhanced patient, being able to self manage. better care pathways based on evidence and value based care sort of delivered in this holistic fashion.

Grant Chamberlain: And, and, and the beauty [00:43:00] of sort of the, the practice of my team that works on Ziegeler is this crosses over now incredibly elegantly to the behavioral health space.

There’s no area in telehealth that is, you know, is we at, at the a TA, we used to say we want at know. Telehealth and digital health to be as good as in person. The one area that’s proving to maybe to be better than is in behavioral health. The behavioral health and it will be, you know, long term, the ponderance may be delivered virtually to some degree because of the stigma of some signs associated with it, but mostly just to create better.

Compliance and access 40 percent of all behavioral are canceled or missed. If you can create a more easily accessible and, but it also fits seamlessly over the home and QBA services, the hospital at home, slow sector. It fits elegantly into the physician practice managed space. So we’re, you know, we’re now at a point where these tools, solutions are part of the broad fabric and all, you know, we [00:44:00] can bring to bear because, you know, we are, we’re, as you saw, we’re at the forefront of the innovative technologies and solutions and they have to embrace these digital health solutions.

Vic: Okay, so thanks for that. That gives a great perspective of everything that you are working through at Ziggler. I want to pivot now to talk about the markets today. Great. Uh, because we all have to exist in the capital markets that we are living in. Uh, before we get to that, let’s just have a quick, uh, note from our sponsor, our sister fund, uh, Jumpstart Foundry.

Doug Edwards: Thanks guys for the opportunity to talk about our pre seed fund, Jumpstart Foundry. My name is Doug Edwards, CEO of Jumpstart Health Investors, the parent company of Jumpstart Foundry. We’re so excited to be able to talk about, uh, early stage venture investing. Certainly the need for us to change the crazy world of healthcare in the United States.

We are spending 20 percent of our GDP north of 4 trillion a year on healthcare with [00:45:00] suboptimal outcomes. Jumpstart Foundry exists to help us find and identify and invest in innovative companies that are going to make a difference in healthcare. in our country. Every year, Jumpstart Foundry invests a fund, raises a fund, and deploys that across 30, 40, 50 assets every year, allowing ease of access for our limited partners to invest to help us make something better in healthcare.

Some of the benefits of Jumpstart Foundry is there’s no management fees. We deploy all the capital that’s raised every year in the fund. We find the best and brightest typically around single digit percentage of companies that apply for funding from Jumpstart and we invest in the most incredible, robust, innovative solutions and founders in the United States.

Over the last nine years, Jumpstart Foundry has invested in nearly 200 early stage, pre seed stage companies in the country. Through those most innovative solutions that Jumpstart Foundry invests in, we also provide great returns and a great experience for our [00:46:00] limited partners. We partner with AngelList to administer the fund, making that ease of access, not only with low minimums, but the ease of investing in venture much better.

We all know that healthcare is broken. Everyone deserves better. Come alongside us with Jumpstart Foundry, invest in making the future of healthcare better and make something better in healthcare. Thank you guys, now back to the show.

Vic: Okay, we’re back. So, Grant, thanks for walking through that deep dive into Ziggler.

I think the audience can see why I wanted to have you on. The wealth of knowledge around sort of how the market has evolved, how the technology enables it, how reimbursement can be standing there ready today. Thanks And how obviously, honestly, incumbents and new players are kind of leaning in and, and adopting new technology along with the patients who I think have been ready for several years.

That all has come together, almost a perfect storm where we are ready to [00:47:00] change the way we deliver care, change the way we pay for care, change the way that patients interact. Have risk be shared and the upside be shared. And yet the capital markets are, have shifted dramatically. And so I want to show you this, um, this research I gathered on a pitch book.

So in the last, um, we had a, we sort of had a really hot market after, after COVID, everyone started using their STEMI checks to buy things. Uh, the supply chains weren’t ready. Inflation went up, the market went up, everything went kind of crazy. And there were 1, 610 venture deals done in this sort of peak period.

I just pulled out this list. You can pick any timeframe. In those 18 months, 1, 600 companies were financed. And the management teams, of course, there’s, it’s a bell shaped distribution, right? But, but in general, they have executed, they have [00:48:00] delivered on what they said they were going to do. Uh, in that when they raised the money and now all of these growth companies, these are, these are early stage seed, a B kind of rounds of venture 1, 600.

And, you know, total capital of 14 billion was put in place. And I believe that those companies now cannot raise money at the same valuations, the same terms that they raised money before, I think it’s just. It’s impossible. I know you have some slides to talk through it, but I wanted to sort of Discuss it first.

The market has corrected the public comps where we all are going to have to eventually sell to a public company. Some of these companies might go public. You have to eventually connect to the public valuations. And I don’t think it’s going to be possible to raise capital at the same rate. But I want to get your thoughts on the market overall.[00:49:00]

Grant Chamberlain: So, one, you’re spot on. And to some degree, we’re in a much healthier environment today than we were the last several years. It would have been wonderful to see a continuation of the level of capital that’s flowing into the space.

Vic: Yeah, you and I both love it when the valuations are high and there’s,

Grant Chamberlain: lets not, not really.

I’ll tell you. Well, you know, as I tell my wife all the time, I’m, I’m a marriage counselor. I manage expectations. I, I sort of bring parties together and it’s, it’s not really a healthy environment when, when deals are overpriced or, you know, mispriced, it isn’t healthy for anybody because it’s, it’s difficult to build back into them.

So, you know where we were. You know, you know, two, two years ago is money was flowing in and it was really chasing revenue and chasing growth at any cost and revenue and growth was, you know, you money would pour and anybody was showing revenue growth, capturing share and had a viable [00:50:00] solution, but discipline to valuation was lost.

And, and, and I think where we are now is we’ve pulled back. And, you know, the market is shifting its lens really to much more prudent valuation metrics that honestly much more in line with history and also looking more at, and we’re going to talk much more about this, about really a gross margin profile.

And a pathway to clear pathway to profitability because profitability was almost an ugly word three years ago, two years ago, because it was all about growth and we can just pour money into companies and they’ll eventually get profitable. Well, if you don’t price, if you don’t price deals and acquisition them in a correctly, you’re never going to get there because you will always be dealing with, you know, you know, one, A benchmark that you’ll never be able to grow into in terms of valuation.

And so we’ll, we’ll speak to that in more detail. I don’t actually view where we are now is an incredibly much [00:51:00] healthier perspective. And I’ll get into sort of how I think the market really thinks about valuations in terms of whether it is a staffing companies to a, to a SaaS company, but we’ll touch on that later.

Vic: Yes. So I have the unique perspective, uh, personally. Besides hosting this podcast, I’m a VC who I get paid, and I have two funds I’m managing right now. I have, I have a fund from 2017 that’s fully invested and participated in several of these 1600 rounds and have portfolio companies that we have to navigate through this, this situation.

And then I have a new fund that doesn’t have any of that baggage, that has fresh capital, and I’ll start with the new one first. We are seeing seed sage deals that are leveraging technology and AI and the cloud to be a cashflow positive, breakeven, profitable growth right now, today. Um, and my choice of [00:52:00] investing in a, in a fresh new company with no, um, no baggage, no things to figure out, um, versus jumping into a series C round with all, you know, a very complicated board structure, preferences, um, People that are mad, a bunch of employees that are frustrated and burning money.

Uh, my new fund’s not going to do that. I said, so you have this really interesting dynamic where you have some new startups that are entering the playing field with a different, um, frame of reference. But then you have 1600 or so companies that are trying to unwind and navigate the way through this complexity.

So I think that’s what we are seeing out there.

Grant Chamberlain: No question. Anybody back to your opening statement about. One, we always have to, unfortunately, fortunately, whether it’s a real estate for your home or the market, you have to, you have to navigate yourself to where the public markets are. And if you pull up the slide, if you would, on sort of where, [00:53:00] where we’ve, you know, because this is, this is a critical slide.

My world of sort of managing expectations, uh, because when you ask, you know, where are we going and health care M& A and our deals getting done, it’s taken a year. I

Vic: have been on boards where you have presented this slide. It’s a great slide. So let’s take a minute and walk through it.

Grant Chamberlain: Yeah. So, you know, unfortunately, or unfortunately, you know, the market has, Come back to sort of historical norms of where valuations are.

And again, I’ve always to some degree hated revenue multiples because it really is, it’s an, it’s an imperfect measure of, of a, of a company’s value. Companies should be long term valued on sort of steady state EBITDA, steady cashflow profitability, but for earlier stage companies, we use metrics that aren’t there, but this shows,

Vic: I mean, I think the case for it is.

We’re growing into this EBITDA over the next [00:54:00] several years, but we’re not there yet.

Grant Chamberlain: Yes.

Vic: And so, uh, some kind of growth rate, uh, can be used, but, but anyway, talk through the slide. So in November 21, you picked a November 21 to sort of pick the, uh,

Grant Chamberlain: right. So, so for people that aren’t looking, the slide shows that for the peak Of the market, we’re down 65 percent across the digital health and sector, all the relevant public companies that trade in that we are looking at in the, in the.

Digital health space are down 65 percent on average from where they were in 21. Uh, but interestingly, those, you know, those revenue multiples, you know, that were in the, in the six plus times, you know, are shifted down, but some of them are very different in terms of the characteristics, because interestingly, the gross margin profile, the companies over that horizon.

Really hasn’t changed much. There’s still, you know, the premise of where they were, the gross margin percentages were in the high forties in 21 for the same set of companies. They’re still in the high forties. [00:55:00] They’ve started to navigate to. More traditional levels of multiples of where they should be based upon the type of companies they’re on.

Uh, you know, when I think about, you know, pure staffing companies that are staff augmentation companies, companies that are trading in, you know, the, the high twenties to 30 percent gross margins, and those are staff augmentation companies. And, and they should be trading at staffing, you know, augmented staffing multiples in the one I have to tune up and that, but the companies that are really in the 80 percent to 90 percent gross margin profile should be trading at, you know, the, and can be creating at, you know, a six plus times multiples of revenue, because really all that is.

Is, you know, revenue multiples should be looked at and thought about as a reflection of what steady state growth EBITDA could be because of the gross margin profile. So the world today has shifted their lens to saying we need to get back to traditional metrics evaluation and [00:56:00] traditional metrics evaluation really our gross margin in steady state.

Vic: Yeah, so if we, let’s, let’s take, um, Teladoc and Lifestance just to pick two out that I know well and I think will be, will illustrate the point. So Teladoc hasn’t changed its gross margin materially and Lifestance probably hasn’t either. But Lifestance is growing much more quickly because behavioral health is a huge problem and they are offering sort of in network reimbursed for individuals.

Thank you. Behavioral health. Is that fair? So like, so their, their EV, uh, to revenue multiple is slightly higher than the market. TOADOX is slightly lower, pretty close to exactly on it. And that’s reflect, that’s probably proper, right? The market should come down, the value should come down broadly across the whole thing.

And then if you have really strong growth, you know, the public company, you get a slight benefit.

Grant Chamberlain: That’s exactly right. And so the, the, the, the concluding component of this, of [00:57:00] the slide really is the combination. Valuation should be a combination of two things, growth rate and, and profitability period.

It’s sort of a combination of those two things where, where, you know, what, and what, what the, With the gross margin and more importantly, what is the steady state EBITDA margin percentage and growth rate really defines whether you think about the rule of forties, the rule of fifties, you know, what, what growth rate and what EBITDA margin profile is define successful companies.

If you think about the fit of how you should be valuing a company. It is those two things, you know, and I, I, I sell companies on a forward position of where revenue is going to be in the forward period, but it’s only because if I can justify that growth rate through existing platform growth, but I also more importantly, We focus on what is the steady state gross margin and EBITDA profile of the business.

One, it’s at [00:58:00] a platform size that can be financeable or exitable. And you, you have to have more discipline because the problem we have right now is where we’re going to go in this, this discussion is we have. An incredible cadre in my white paper of 832 companies, 75 percent of those companies are sub 20 million revenue.

A vast preponderance of those companies raised capital in the last couple of years at unfortunately valuations that they were, were too high that they’re going to have an incredibly difficult, if not impossible time building back into. And that creates a really. Difficult conundrum for the sector right now, because they’re trapped because, you know, to, to raise money.

Is is gonna be difficult be, you know, to take place because they’re gonna get crushed. They’re gonna, they’re, the evaluations are gonna be reset. So we’re seeing, you know, more penal, whether it’s participating refers or pay to plays. [00:59:00] There’s, there’s structures that are essentially forcing. The, the ills of the past to sort of kind of bear in which the stacks of preferences, the nature of the structure are reset so that the company can operate now in a reset environment and a healthy environment where option pools are reset, motivations are reset, and access to capital is reset.

And, and that’s, you know, fortunately where we are today, but. We’re in a healthier place and it’s taken 12 months, unfortunately, or fortunately for the, for management teams and boards to navigate these scenarios and come to realization. So we are starting to see capital come into the market and we’re starting to see M& A take place.

And I know that’s where you want to go as part of the next discussion. Let me, let me try

Vic: to, um, See if you agree with this, this, uh, example just to use as a place for people listening to, to get a handhold, because there’s a lot of complexity. [01:00:00] My, my kind of working to simplify it is if you’re running a high growth business and raise money 2 years ago, 10 million revenue business, the general market is at 6 times revenue, according to your slide, but the public markets are.

And so you raise money at the fair price of a 60 million valuation. And there’s lots of moving parts, like if you’re more profitable, or you’re growing faster, but just to keep the math easy, people will do it in their head. You have 10 million in revenue, and the company’s worth 60 million, you raise some money.

And then the management team operates well, let’s say they double revenue to 20, which would be, you know, it’s pretty hard to grow from 10 to 20, um, in a 18 month period of time. But now the multiple has come down to two, right? So, so the management team has done everything that they were supposed to do in [01:01:00] my made up example.

They’ve never made a mistake. They’ve doubled the business. It still has great prospects. Everyone’s going full steam ahead. And yet the valuation multiples have come down to two. So 20 times two is 40. So all of that work, all that effort, um, and you have lost value. You’ve gone from 60 to 40. And you’re out of money because you would never, you would never finance to the finish line.

These companies raise money for 18 to 24 months. And so it’s time to raise money again. The team has done everything you asked them to do, and yet you can’t raise money. And so what, what do you tell a board or what should a, what should a board member or an investor or a. executive think about in that scenario, or is that scenario not fair?

Grant Chamberlain: No, no, it’s very fair. But there’s, I think there’s two, there’s two sets of companies right now that we’re navigating with those. There’s those that are where [01:02:00] you are, or those that had raised capital still are probably have gross margins that are in the seventies to 90 percent and have are still able to achieve.

Outsize multiples and have expectations that are well aligned, but it’s still even their, their expectations were multiples in the 10 to 12 versus where the markets for the services companies were, but for the companies you’re speaking to, you know, it is, and we’re seeing this over and over again in the space because everyone is trying to figure out certainly with some urgency.

How do I find the next pathway to one? recouping my equity or getting back into the growth pathway. And one that you’re seeing, you know, what was growth at all costs, money flowing in, building infrastructure to chase revenue growth, much more focused on how do I find a clear pathway to profitability because the market is to, to get, to raise capital.

You have to,

Vic: you gotta show me a way to get to [01:03:00] cashflow positive. That’s right. So

Grant Chamberlain: we are, we are now in an incredible, you know, the dialogues you have in the marketplace, if you’re, if you’re not already profitable, when there’s, there’s a number of companies that we’re marketing now that are profitable, which is great, but they’ve just gotten there in the last couple of years.

But if you are at that point where you’re still burning some cash. You, you, you have to have a credible story today to show a pathway to profitability and, and, and therefore, and if you create that with a one, both a set of a pipeline and infrastructure, but more importantly, starting to think about your cost structure to get there.

And so it is, it’s an, it’s an issue.

Vic: I mean, I, I’m going to be more aggressive, not thinking about you have to cut costs, period. If you are raising highly dilutive money. You have to cut through the meat, you have to cut a little bone, uh, management teams never cut enough. I think boards, what I want to talk to you about, is boards [01:04:00] have a couple of choices, right?

They could cut expenses and not have to raise money at all. That’s the best choice. Um, they could cut the valuation and it’s really painful. Now I have to take a write down in my fund, I gotta tell my investors, this company that I love, that I’ve been writing you about and telling you how great it is, We’re now taking a write down on it.

Even though you see Microsoft up to the moon with AI stuff, my really valuable asset is appropriately written down. That’s not that fun. Or, uh, I can try to structure my way to a very complicated, uh, security. With a 2x, just painting preferred and all this complexity really to hide the fact that I’m writing it down, or I should write it down, but sort of make it so complicated that many people don’t know, and I can pretend like I don’t need to take a write down.

Now I may be over [01:05:00] exaggerating it to make the point, but those are the options, right? Don’t raise money at all and be cashflow positive right now by cutting costs. That’s difficult. Take your medicine and recognize that, okay, our value has been cut in half or 60 percent lower, maybe lower than half, and do sort of a clean term sheet, but on a really bad headline number.

I like that because it aligns in cenos and it’s not complicated. But it is apparent to my investors and everyone what the problem is. Then you’re cleaning the floor or, uh, what many people do that. I want your opinion on, you can tell my opinion, they add a ton of complexity and structure, uh, because they can, and they have lawyers and they structure it.

But the misalignment of incentives is dramatic in that case. So what are you seeing out there?

Grant Chamberlain: No, and again, two ends of the spectrum. You have, you still have, [01:06:00] and we’re going to speak to the second story. You still have a fair amount of companies. I’ve got a number of them under contract work. I’m closing three deals in the next four weeks.

And I just closed a deal that reflects this called, you know, Somnaware and a sale to ResMed. We’re, we’re wonderful, high growth, profitable companies that were getting rewarded for their discipline. You then have this, the other side, if

Vic: you’re profitable and growing quickly, that’s a different animal.

Grant Chamberlain: And so, but then we have the other side spectrum where I’m seeing a lot of, and we’re actually very active in, is dealing with companies with the exact same circumstances.

Because honestly, many of them, if not most of them, Really still have a strong value of opposition, are still creating business, have great logos, have great market. Yeah. But their, but their capital structure is their biggest liability. And so finding a, a me and their board dynamics and their capital and they have done nothing wrong.

They’ve done nothing wrong, wasn’t it’s right except for, you know, that’s why in, in our world, back to my time at [01:07:00] ge, back to the time, it’s all about valuation, mis price, poorly acquired deals, poorly finance deals. Are the death of a company because whether it was over levering companies at GE, when I was with GE capitals, corporate finance group, you know, at higher valuations that cross those companies, whether it is where, you know, what took place the last couple of years.

Prudent and disciplined valuation methodology and thoughtful structure and thinking through the entire life cycle is absolutely there. But where we are now with the large preponderance of the companies in the, in the tele, in the, in the healthcare and the digital health and the technology space is unfortunately mostly about capital structure and board dynamics and misaligned incentives, period.

And so there’s only a handful of ways you get around them. You’ve cited several of them. It is, you know, Cutting costs, finding a pathway to profitability, building out the use cases that can get there and trying to reset the market and the valuation, the capital structure in a more disciplined way. And it’s still, you haven’t gone to, you still always [01:08:00] have to create the right amount of incentive for management.

So we are also seeing continually reset. Option pools, because you can’t have success unless you’re motivated. So, so it’s even more dilutive to the existing pool because you have to reset the option pools. So all those things lend themselves to, you know, a very artful process. My, my, our world is really about expectation management.

Managing processes, but really the marriage counseling of dealing with all of those constituents to get to the right level and the right appropriate structure. So whether it is, you know, finding, you know, debt capital, because there still is, you know, venture debt that people are using now, what took place with Silicon Valley bank.

You know, I did create a blip in some of the pathways that many companies are using to get to a, a, a structure that was an elixir to avoiding this problem, but we’re now in a place where we’re, no, I, the one piece of the puzzle that you haven’t added, I think is that one of the areas we want to talk about that we’re seeing a lot of [01:09:00] is mergers of equals again,

Vic: scale.

So you taught me, you taught me about this last week. I don’t know this space, but it’s really interesting because of all the companies. Whether it’s 1600 or a thousand, there’s a lot of companies in this space that they need to figure out something.

Grant Chamberlain: Well, they have to think, but at the end of it, if you go back to some of the, some of the core tenants scale matters, the only way that the sector and companies are going to become of, you know, to, to where they get to profitability and leverage their gross margin and their SG& A scale matters.

And. No, there’s too many point solutions. There’s too many companies that are sub 20 million that have really good solutions, but they’re trapped because of the, what we’ve just discussed.

Vic: Yeah. The buyer, the health, the buyers want, want fewer vendors, you get scale, you sort of get operating leverage. That, that is a really interesting, um, approach.

I want to,

Grant Chamberlain: I want to get to the, I [01:10:00] really get the punchline of MOEs because it really does, it, it solves much of what we’re discussing here. So mergers of equals, if you get parties that, you know, one play, it has to be one plus one truly does equal three, that there really is. A strategic rationale and there’s operating synergies.

There are SGMA synergies and there’s revenue upsell. But the beauty of it is the headline number of valuation is goes away. It’s a question of relative

Vic: valuation

Grant Chamberlain: and you can, and you know, parties like ourselves and you know, with, with those boards, they can sit and look at the traditional metrics that we just described, gross margin, cash flow, Growth rate and marketplace and logos and brand and say, you know, what is the prudent relative valuation between the two of us bring them together?

And actually you solve a number of things. You shorten the pathway to profitability, you get scale and you start to build a business that. One can be financeable, but in [01:11:00] the same breath, you also force the reset of the capital structure. So preferences and stacks get sort of rethought through the obstacle and you, you kick the can on what is the real headline valuation until you build back into what you want to go.

So it. I think it is one of the cleaner and most prudent ways for parties to start to think about how do we get out of this trap for the groups that we’re talking about here that, that don’t have access to capital without crushing the existing stack. It’s a, it’s a, it’s a means to start to do it. Now they’re complicated.

Obviously leadership and board and governance is the most complicated thing, but because there really are few alternatives, it is, it is going to be one of the. Areas that I can, and I’m starting to seem to have a number of them under contract right now, we’re going to see a lot of growth of that taking place in the next couple of years, because you’re

Vic: almost could, uh, I mean, you could almost [01:12:00] create a product or there’s a lot of companies that need this type of solution and then you’re very well positioned, I mean, this book, but you have a lot of other data that isn’t published.

You can help a company, a CEO and a board. Okay, who should we partner with? Who would be complimentary? That can be part of the value that Ziegler offers. Okay, we want to find a merger of equals. How do we do that? How do we go about that?

Grant Chamberlain: Well, it comes, it comes back to trust. I mean ultimately for somebody like myself or a constituent to do this, There has to be a level of trust that it does this make sense to approaching both the boards, posting the equity fund and saying, here’s why this combination brings together, you know, a series of, you know, services, solutions, and one plus one does equal three plus.

And if we, if we, but it takes again, we’re just the beauty and the unfortunateness of the last couple of years is it’s taken a year for companies to. And ma management teams have finally come to grips with the fact [01:13:00] that the, that the market, those valuations aren’t coming back. So I, you know, we’re at, it’s, we’re at a point now, and I, you know, I would, our, you know, we did, I had more business done in 21 than I’ve done in my entire career.

22 was difficult because we had this transition in valuation, and now we’re in a period where I’ve got 11 deals under contract. I’ve got four deals closing in the next month. And they’re all reset to prudent, realistic, historic norms of expectations. And we’re also looking at this mergers of equals and it takes the lens of having somebody that says, here’s why this makes sense and here’s why these valuations are the right size for these companies at this stage.

Vic: Yeah. What’s, what’s interesting is there, there are benefits and incentive to being on the earlier side of this. Right. So there’s 800 companies in your report. There’s 1600 that I was looking at. If you, one of the first few that goes with Ziggler does a merger of equals. Now you have double the revenue.

You can cross sell to your different customers and you [01:14:00] begin building. You don’t have this, this overhang of every employee and every shareholder worried about valuation. Now you have a new, you’re reset and you start going to winning business and winning the market. And then there’s going to be, there’s going to be failures.

There’s going to be assets that don’t make me through this. And you can now pick up their customers and just, just take their customers. Or maybe you acquire something pennies on the dollar, the first, uh, the first kind of tranche of companies. Working with Z like this summer and fall are gonna be dominating.

Grant Chamberlain: You’re, you’re, you’re, you’re, you’re exposing my current business plan because the, the space we’re, the space we’re talking about here right now is in desperate need of a handful of players of scale that are the platforms. You know, you have Epic, Cerner, and, and Athe medic on, on one area. In imaging, you have a whole big of, you know, series of filings, right?

So this space needs. A couple players for high acuity, a couple players that do the post-acute senior [01:15:00] living space. A couple players that are dominant in the behavioral health space, a couple players that are, that are dominant in the Access, access and navigations place. We’re, we’re starting to build some of those.

But you know, my, what I’m looking at right now, and I’m talking a couple people, is, is let’s create, because you know, with the, with the landscape we are now, where the valuations are now with the realization that these comes are trapped. It’s the right moment in time to find plum assets and bring them together on a platform to create that player of scale.

Vic: And there, there’s an ocean of dry powder, dry capital waiting for the market to find its footing. It’s not clear what the Fed’s doing. I think they’re still raising rates. I think we’re going to have a significant correction. We went over last show how top heavy the NASDAQ and S& P are. But there’s only a few names like propping up the headline numbers.

But once you get the market chaos figured out, maybe it’s six, maybe it’s 12 months, but it will, [01:16:00] it will come through and then these mergers and equals have happened. You start to have a, another crop of future dominant companies. There’s going to be like the next 10, 20 trillion, you know, multi, multi trillion, multi, multi billion dollar, um, assets that are created.

Oh, no,

Grant Chamberlain: there, there are some, some of the largest PE firms in the country to some degree are, are sort of waiting for, and we’ve been discussing with. That that’s that sequence of events that needs to create these players, because there’s a, there’s an enormous amount of capital in the venture space of players that want to take advantage of everything we’ve been discussing, deploy capital to create this first stage of this capital formation, but right on the tail and this, I’m talking 24 and 25.

There’s going to be the big, big PE players dropping 500 million to a billion to, to fund the simulation of these

Vic: big, big [01:17:00] platform that is sort of, sort of pulling in 15, 20, 30 different. Kind of apps and product lines into a health system offering

Grant Chamberlain: that

Vic: could be really fun to sort of, uh,

Grant Chamberlain: once again, you’re, you’re, you’re, you’re, you’re, you’re giving away my business plan, but that’s exactly what we’re working on as long as, as part of doing all the day to day work we’re doing, we are actually creating and looking towards building that framework you just described.

And it comes, and again, it just comes down to why we do the research. Why Ziegler and the rest of my partners have such deep access is, is we know where the puck is going and we have a really good finger on the pulse of who are the leaders in the space and who could be and should be part of this initial formation and then who could easily be the parties that are tucked in to create that framework.

So it’s, it’s, it is, it’s a, it’s a good lens, but the good, you know, the good news is it’s going to help resolve all the things we started with. How do we create, you [01:18:00] know, one, the health system, the payers don’t want 25 points of light coming at them. They want a platform to deliver it and it creates unencumbered access.

But most importantly, everything we’re working towards in most of the deals I’m working on is creating a workforce optimization tool because we have an impending, they’re just not

Vic: enough

Grant Chamberlain: people.

Vic: Yeah,

Grant Chamberlain: there’s not, we, we have a bomb about to blow up mo and not just because of where we are today. In all honesty, the, the, the, the bolus of boomers that are coming into the healthcare system that are the, unfortunately the most unhealthy population in history because they were all, they’re the McDonald’s generation.

They’re the smoking generation, the drink and, and they have multiple comorbidities. Yeah. They’re all,

Vic: they’re all turning 75, 80. They’re, yeah. They’re, they’re

Grant Chamberlain: and they’re, they’re gonna be consuming healthcare like no other time. And we are, we have nurses and physicians leaving in droves. So these digital health tools are the only way we’re going to create access [01:19:00] because they have, we have to use AI.

We have to use all aspects of technology to triage. This is officially possible so that what has historically been a 30 to 40 minute interaction with a patient. Is done in 20, but honestly done in 20 better because they have all the content, all of the evidence, all of the alerts, reminders, and all of the tools

Vic: they have.

My data tracking every day over the last 90 days, and it’s been assessed. So when they come in, it’s a really effective 20 minutes, right? So for anyone in the audience, whether you’re an entrepreneur or institutional investor, or you’re running a health system or at a payer or something in between.

There’s, this is encompassing of the whole thing. We’re redoing the entire industry in the next three to five years. And so it’s great for you to set the table now. You know, we have this on recording on July 20th. We’re recording this. It’ll be published in the next couple of days. It’ll be really fun to come back next [01:20:00] quarter, six months from now and see like it beginning to take shape.

Grant Chamberlain: It was, it was, I want you to put your lens in 24 and 25. It is one that we’re starting to get and identify players. Sort of on what I would describe on the bulls, good side of the bell curve are seeing good exits are seeing be rewarded for the discipline and growth. And then we have some of those participants are going to be the consolidators and building out and accumulates and attach themselves because there is so much dry powder out there waiting for what we’re describing to get done.

I think

Vic: in six months, you’ll be able to come back and say, Hey, here are the seven, eight. Five, 10 mergers of equals. And here’s the, here’s the success they’re having. They’re starting to bring their teams together. They’re starting to really win in the marketplace. Yes. The big change, like in the, you know, front page of the wall street journal will be to 2025.

But you and I and the Health Further audience will start seeing the formation of these things early on.

Grant Chamberlain: [01:21:00] There’s no question.

Vic: Grant, just as we close, how do you keep up with all of these things? How do you keep up with the massive changes? Are there things that you’re reading? Uh, things that the audience should follow, um, to keep up with all the changes.

Grant Chamberlain: Yeah, I will tell you where I go to, again, we went back to all that list of conferences. I will tell you there’s a subset of conferences, you know, some of them are just vendor shows, but honestly, a number of them. Whether it’s health evolution, whether it’s five and health, and honestly, the ATA, American Telemedicine Association, there is incredibly deep content and access.

They’ve changed themselves to, to become resources for, you know, identifying pain points, identifying resource. And honestly, so I, you know, I, I attend a lot of conferences. There’s a couple of, I actually sit in sessions. Most, most conferences, people just go to, to do meetings, but I, you know, the, you know, you, you are seeing the continued assimilation actually.

You know, sit on a lot of panels. I’m [01:22:00] probably on anywhere from eight to 10 panels or keynotes a year, but you’re seeing leaders in the space that you get to hear where things are going. And if you think of where, and honestly, right now, sort of the wild west is now in chat, GBT and AI and what’s going on there and because that is going to be, you know, the next evolution of how do we create guardrails to navigate, manage this into everything we’ve just been talking about.

So. I, you know, I’ve, I’ve been, well, we have,

Vic: we have not seen the first airstrip use case in AI yet. That’s that’s right. But, but it’s, it’s gonna appear in the next 24 months.

Grant Chamberlain: It’s, it’s, it’s absolutely coming. And we’re at the, we’re at the front edge of that right now. And I think, you know, so I attach myself to players that I, whether it is Dr.

David Ru at, you know, who’s at Microsoft, you know, he is, you know, he’s somebody I’ve trusted for 20 years. You know, I, I look to who are the leaders and innovators at each one of these points. So I, I have one or good news is I have wonderful historic relation, whether it’s in law firms and, you know, at the leading law firms and, you know, [01:23:00] certainly at these conferences, industry participants, but I, you know, you, you know, we all, the great thing about life today is, you know, every morning I get, I have 10 different articles, you know, websites that.

Pound on me. Here are the things that I can very quickly navigate to the ones I want to see. So, you know, if you’re going to be, you know, the reason I I’ve told people my entire career, I’m not in life sciences is to, you can’t dabble in life science. You have to have a PhD. You have to have somebody sitting next to you.

You have to live it and breathe it day to day all the time. If you want to do tech, that’s

Vic: right. If

Grant Chamberlain: you, if you want to do what we do for a living, You have to live and breathe it every day and be at the front edge of the sphere of where innovation is going, where disruption is coming. And so we, so the bankers and the institutions, why Ziegler, I think is so unique is.

Every one of the participants that leads our practice groups and, you know, Dan Herman, who heads the firm is sort of the ethos of this. He knows everybody and everything that’s going on in the [01:24:00] post acute senior living base. Dan is one of the most unique go to resources in what’s happening in post acute and senior living.

And then each one of the participants inside of the corporate finance group that we have are similar to myself in the, in the digital health and telehealth space are go to resources. That the country looks to and they, we all speak on panels, you know, that’s how we keep ourselves informed as we, you know, we are constantly in the flow, but we, we stay in our lanes.

You can’t dabble and do a device company, or you can’t dabble and do life sciences. You have to live and breathe where you are. And that’s, and you become a resource in those spaces.

Vic: I think virtual care, telehealth, health virtually everywhere is your tagline. That’s a pretty good segment to be in right now.

It’s where the fuck is going, where a lot of things are going to be.

Grant Chamberlain: Whether it’s lucky to be good, but again, it goes back to. My father is it essentially replicated my father’s [01:25:00] practice. My father being by saying that I, you know, I was always admired. My friends always spoke to me about that. He used to stop and do house calls until he was 72.

He practiced till he was 72 and he was still doing house calls until he was 72. And he was one of the preeminent as physicians. I said, Dan, I’ve, I’ve, I’ve effectively recreated you, but I, I, I’ve done it, you know, instead of one to one I’ve done at scale, I’ve done you one to 50.

Vic: Right, right. Yeah. Excellent.

Well, grant, thanks for doing this. We need to have you back as we just follow this progression over time. Really appreciate it. Excellent. Absolutely. And I’ll put in the show notes. So in the show notes we’ll put links to your report, a couple of these conferences that you recommend, your email, LinkedIn, we’ll, we’ll give everyone sort of all the resources there so they can.

They need to get your advice as they’re thinking about their merger of equal

Grant Chamberlain: fantastic. I really appreciate this. This was a lot of fun

Vic: Yeah, this was [01:26:00] fun