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Paul Martin

Good afternoon, and welcome to another episode of Paul Martin's crucial conversations. Today we are really excited to have you with us. Nick Roland Nick is a principal at Shirting Capital Partners, based in the heart of Private Equity, Chicago, Illinois. Sheridan is a private equity company that focuses exclusively on companies within the health care industry. Currently, Sheridan has a portfolio of seven health care companies that includes empower physical therapy that all of you are familiar with and currently in power has over 40 clinics in four states with the heart of Empower and the start of Empower in Arizona. So Nick, it's great to have you with us today.

Nick Rowland

Great to be here, Paul. Thanks for inviting me.

Paul Martin

So Nick, this is this is awesome because it's so great to have someone who is looking at this a little bit from the outside in, you know, having, you know, when you're in this industry, you know, you can only see it from the inside out. You have the perspective as an investor that has been successful in many health care companies seeing this industry from the outside in. What attracts you and Sheridan to the physical therapy industry?

Nick Rowland

Yeah, great question. And maybe just. For a context for. The for the audience's benefit, Sheridan. Were a. Health care focused health care only private equity firm. And we invest. In people and partner. With founders. Like the folks at Empower. And we work within. three sectors in health care. So we focus on provider businesses, specifically human power, as an example that in the physical therapy space, we have investments. In. Dermatology, ophthalmology, other other areas that we talk of fondly as kind of retail, health and food places that your providers themselves would visit. We invest in outsourced services companies. That support and. Contribute to the broader health care ecosystem, whether that's payor, pharmaceutical or provider businesses. And then we invest in medical products businesses. So Sheridan. Has a broad aperture with. Which we look. And evaluate and. Find and partner. With companies. Like like Empower Physical Therapy. We've invested in 13 platforms. Since. Our founding back in 2012, and each. And every one of those we've partnered with. The. Founding group of the founding family. The owners, the entrepreneurs focused. On. Building great businesses in partnership with Sheridan. The goal for. Us, you know, as an investor, is to. first off. Identify. Areas of. Interest that have what we define, defined, define as sort of long macro. Tailwinds supporting. The. Growth, the expansion and the success of that category. And we. Do we divide specifically within those. three subsectors. Providers. Services and products, those subsectors that really sit at the core of some of those macro tailwinds. And then as. Investors, our goal is to find the partners. And the companies underneath those that are that are benefiting from those tailwinds. To. Accelerate. Invest in and support. Those those found. Runners, those teams to take of great businesses. Specific to your question, Paul, physical therapy had. Been on. Our radar for over five years before. We actually invested in and found. The right team to. Support. Back. In 2018, when we created. Empower Physical Therapy. But as a sector, as. I think your audience is extremely familiar with. You know, but from an investors one, it's a large growing market. It's the 35 billion dollar market. It's growing at. three to 5%. Obviously, there are outperformers in that who are growing faster than others. So as an investor, that's a key factor for us to check the box on and be excited about. And and that outlook is is strong and steady for a. Number of reasons. We'll hit on. It's highly fragmented. There are somewhere. Between. 35 to 40. I'm sure we. Can debate how many there are, but 35 to 40,000. Clinics in outpatient. Petey, and about 85%. Of them remain independent. And so there's an opportunity from an. Investment perspective. To bring teams together, create. Create a. Large. And. Growing platform and affiliate with like minded practitioners to create great businesses. And there's a bunch that I'm sure we'll hit on as we we have our conversation. And then lastly, I think something that, you know again, as an. Investor we've identified specifically is it's a valued and critical service. Offering. Differentiated. On a number of fronts. first off. It's a low cost and care setting as as folks may not realize if. They're within or isolated into. Physical therapy or outpatient party. The setting of care from from a provider perspective relative to. Hospitals or on premise. Services. Or for. Higher acuity care on a relative basis is a lower cost of care. And from a macro perspective. We all know and we see the headlines around. The cost of care and health care expenditures. Are running. Through the roof, so. Value based care and all of these. Macro themes of how do you deliver. More. Efficient. More accurate. More value based services and in the the patient life cycle is is critical, so physical therapy sits at. The epicenter of that. I think secondly, and something. That I'd say. Shared in over the years has become more of an advocate as we've been. Partnering with. Empower the the. Health care. Profession and specifically outpatient. The relationship that our providers. Built with. Our. Patients is. Unparalleled. The ten to 15 visits. Per each. Session, the time and amount of time with that patient. Building a personal and a. Professional relationship, the insights, the diagnostics, the the the. Just the information. That a physical therapist aggregates from a professional. Lens and is able. To. Support. The patient. Locally, but also. Coordinate communication back to primary care providers and other specialists. Within. The whole lifecycle of of a. Patient is really. Something that we find and think is undervalued in the marketplace. And so all of those. Kind of coming together. Large growing. Market, highly fragmented, an opportunity for us to invest and. Support. Our teams in an. Area that, from a. Macro. Perspective. Really is. I'd say, undervalued under-penetrated and has an. Opportunity to really shape and influence. The long term trajectory of delivering greater patient care in health care.

Paul Martin

Yeah, that's awesome. And you know, for our audience, you know, it's amazing how someone who has never spent a whole lot of time through the years in physical therapy offices, how quickly the curve is that you come to know exactly what we do and what drives this industry. You know, Nick mentioned, I think, strong macro tailwinds. Is that right? Did I say that right? Yeah. And and to me, what we've continued to say is that investors in this industry, including the strategics that are backed by these private equity groups, are looking for companies that have the ability to grow. I think that's another way of saying strong macro tailwinds. And the other thing that I think Nick brought out so well is that, you know, to us, there's physical therapists. We are the greatest value in health care, which he coined. As you know, the cost is not real high. And the the one on one relationship that is built with a therapist to the patient is so strong. And for an episode of care that ten to 15 visits may cost twelve hundred 15 hundred dollars, no other better value in health care. And Nick sees that loud and clear, and I appreciate that. So so, Nick, what do you see in the future for you and empower kind of working together? What are the goals that, from Sheridan's perspective, that you want to achieve with empower?

Nick Rowland

Yes, so one of the. Things that I'd say from a theme and a thesis that we'll hit on is, again, we dig more. Into how Sharon partners with our platform. Companies and our leadership teams is. We really are growth. Oriented in the macro tailwinds that you highlighted. You know, I would say, you know, kind of as. An industry. I'd say. We probably. Share, you know, maybe. Some some branding or some awareness. You know, outreach or advocacy. I think private equity, historically, you know, if you don't know it or you see the headlines, you know, I think it has a relatively, I'd say, negatively oriented connotation, whereas I would say there's some education that from from my perspective as an investor and specifically the style of investing Sheridan does. It's an opportunity for us. To highlight the. Ways that. We positively impact our. Companies and the ways that we. I would say. Specifically, you know. Unburden some of the lower valued, more. Administrative. More, you know, the inhibitors to. Allowing providers to do their jobs. And so. The goal for us, whether it's an empower or any of our other. Provider businesses or even outside of that in. Our. Medical. Products initiatives. Or outsource services. Is to. Be. A partner to support our. Businesses. Our leaders, our. Teams. To do what. They do really well. And that is, you. Know, be advocates for. Their. Profession, provide great patient. Care, deliver great services. To their customers and focus on that and allow us to invest in the right leadership. Bring the right resources, set up the right infrastructure. To allow focus on on that that core tenet and core motto in it and empower specifically. You. Know, our motto is. You know. Empowering. Our patients to get back to life. And you know, I think we live that as. Investors are providers and live that every day. In the. Communities they. Serve. And so our goal really. Is to be. Silent. Partners. To allow folks to prioritize what they're really passionate about, which. Is the delivery. Of great care to their. Patients and having the resources and tools to be able to do. That efficiently. And and to to a great to great success.

Paul Martin

Yeah, very interesting. And you know, again, for our for our audience, what I heard there correct me, if I'm wrong, Nick, is that, you know, Sheridan certainly brings the capital for growth, and growth is a goal of most private equity groups that are going to support a physical therapy company. But what I also heard was to try to, you know, actually, you know, be interference for the providers interference in a way, meaning try to take care of some of the business issues that as a as a private physical therapy company, continue to come in front of you and try to pull those things away so that the providers can focus efficiently on that one on one patient care that they provide each and every day. And I think, you know, very interesting perspective, you know, and you also brought up, you know, kind of what the majority of folks kind of think, sometimes with private equity, which is, oh, now the day to day is going to change. How do you currently participate in? You know, I'm calling it the governance or the management of in power. What role do you guys play on how they carry out what they do each and every day?

Nick Rowland

Yeah, no great question. It's going to. Be a different answer for different, you know, persons within our organizations. And so, you know, very clearly, you. Are CEO or CEO or. CFO, the. Senior leadership team. We we interact. With regularly. We are partners to help. Them, you know, invest with prioritized strategy, allocate resources, advocate for. Their teams to. Get the capital that you reference. But also reach into our networks and. Understand, you know, what is happening and how are we approaching similar issues in other areas that we've. Invested in? And how can we connect them to other leaders and other. Organizations solving. Similar problems. Uniquely. Situated for physical therapy, but. Trying to give them again that. Broader. Lens, that broader ecosystem. To to 88. And solve and deliver. Those those. Resources. To our team members. So at the. Senior leadership. Level. Sheridan is. An active. And. Supportive partner. In solving those day to day problems for the broader benefits of not only our companies, but also, as I said. Advocating for for physical therapy. And we'll. Hit on that later. On when we talk about. The broader impact of investment into the space and how we. We sincerely. I believe. That's a benefit. For the industry for a number of reasons. With regards to. Our. Local clinics or clinic directors or directors. Of Art. Sheridan, you know, I think we. Would prefer it if. Folks. You know, didn't even know we. Were there or sort of benefited. From the the the availability. Of. Those. Resources, those systems, those people and the professionals doing their day to day jobs were not physical therapists were not providers, were not executives of these businesses. We bring in really. Top tier talent and I'll. Hit on that in a second because I think it's important. To highlight empowers. The leadership team specifically, which we think is extremely differentiated and really. A great resource on a bunch of spectrums, both from an. Operational perspective, but also there are. Physical therapists, which is, is, I think, unique. To the industry and something that we. Stand behind and reinforce day to day in how we. Approach. Private practice. In outpatient. So back to your question on the governance. And the. Management. We're actively. Involved in. Providing all of the the the the perspectives, the. Resources, the capital to our leadership. Teams. To allow them to do. What they're really good at and allow our providers to do. What they're really good at, which is. Focusing on. Managing their clinics, managing their patients, engaging. With their. Communities and. Communities and delivering. Health care at a local level in an impactful way.

Paul Martin

Yeah, thank you. You know, another really interesting perspective. I think I heard Nick at least three or four times use the word resources. But when we talk about resources, he's obviously not alluding to simply capital money, money to grow resources in terms of making business systems more efficient. And I think, you know, what Nick's alluding to is that the resources that are there are six other portfolio companies that may be a step two steps three or four steps ahead of manpower in terms of its size, in terms of its capacity to manage in terms of its systems. And you know, they those resources include those companies in order to draw from that to better enable and and empower, empower. And I know you're going to talk about your management team, but I am just going to tell you, you know, when you guys grabbed Steve DePaulo, you grabbed one of the best. And we have had Steve for interviews and just does a phenomenal job. I continue to see him elevating and elevating and elevating in this industry as you guys continue to grow.

Nick Rowland

Yeah, we're. Extremely. Fortunate. To have Steve DePaula. And Dave Jeena and Matt Figueroa and. Michael Michael Baumel. Excuse me, Michael. Rounding out. Our leadership. Team. And I'll I'll give a little background on. Each of them because ultimately, you know, Paul, I think Sheridan is is who. We are. You know, and we are engaging with Steve and Dave and Michael and. Matt, you. Know, on a regular. Basis. But for your audience. Those are the. The team members and those are the leaders. Of empower that, you know, I'd. Urge anyone to reach out to and have. A conversation where their background. Couldn't be. More. Tailor. Made to the evolution. And progression of a physical therapist. Moving into a leadership role, moving into. A sea level. Role within a large and. Growing platform. So they. Each have unique. Perspectives. one thing. I maybe will revisit just to put. Is some anecdotes and. Some specific specificity. Around the resources. Comment. So, you know, the. Anecdote is. In the. Provider world, regardless of. What specialty that may be. Typically, a. Owner entrepreneur. Spends. Anywhere from 20 to 30. Percent of their time. On administrative services. So if you think about that in just practice the bare basics of not only how. Can you. Share best practices. Within an organization? How can you. Get a community of physical therapists talking about how to. Deliver. Great care, share ideas, collaborate. Innovate and do that in the community. That we foster and empower? But also taking and freeing up that 20 to 30%. Of of time that candidly, I've never heard, you know, a founder. Owner or an. Entrepreneur say they really relish in. And if they did. You know Amanda to Michael Vemos, the CFO. They would do Michael Vemos job and. Not not be a physical therapist. And so. Some of those things like putting. In reporting structures. Putting in. A system wide. Billing and coding. A platform. In our. CRM platform. Putting in processes and. Infrastructure. To. Allow for. Those providers to get back to where they enjoy and why they've chosen. This profession, which is interacting with. With the patient. That, to me, you know, is. Is real value. From how. We support them to do again. More of what they are experts. At. And that's not that's not being counting. There are folks who can do that. There are and that is a valued profession. But you know, with this audience and how. We find. The right teams and the right. People, it's allowing folks to specialize and allowing folks to specialize in the areas that they have spent. Multitudes of. Years. Training and educating themselves. To be experts in that field in that instance. You know, it's providing physical therapy service to the patients. Into the communities they serve.

Paul Martin

So you've talked about the patient, we're now down to the therapist patient level and look, you know, out there in the therapist community, there are some private owners that ask me, OK, if I sell to a company that's backed by private equity. Is that going to change our commitment to extraordinary patient care? What would you like me to tell them about Sheridan in regards to that?

Nick Rowland

Yeah, I would. I would maybe explicitly state. We're very much. Aligned on that goal. And I'd say more specifically, you one cannot exist without the other. If you think about any business. You know, the patient, the customer, you know, the customer and patient are always right. And in that instance. The delivery of care to. The patient to make sure that there is progress on their. Mobility. On their recovery, whatever. Journey they're on. To that they build a personal. Relationship. With that physical therapist, their advocates. Or. The PTA. They're advocates. For. That. Organization and. The culture. That they stand behind. It ultimately. Compounds on itself. To bring others in and expands the ability. For a provider. Who excels at its craft. To serve more. Patients. And from my perspective. There's a nuance between. Serving more patients, which is growth oriented. And serving more patients as well. And that balancing act, you know. Is a balance that. You know, we share with Steve, with Dave and Matt and the rest. Of the providers across. Empower on how to do that. What is the. Right balancing act to make sure. As we look. Forward as investors and we look forward as. As humans. To to make sure value based care and outcomes. Oriented care. Is. Hitting its mark. There continues to be a strong alignment. On good business, you know, good clinical quality, the allow allowing folks to do what they do well. And the long. Term. Coordination of care and the ability. For. Physical therapists to have a megaphone because. They really do. They are well. Situated in an industry. That I personally believe undervalues. Them. And and honestly is. one of the reasons, Paul. That again, we're investing in this space because of those long term macro tailwinds. We know that there is. And will continue to be a significant opportunity to deliver great patient care in a good business sense to more people. To. Make sure. That the private practice and outpatient physical therapy continues to touch and impact more lives. In a positive manner.

Paul Martin

Absolutely, absolutely. You know, so interesting again, to hear from, you know, again, a pure business perspective. And what we're seeing, you know, from from our view is we're seeing one of the biggest changes in this current market. And as you know, Tom Carden, who you've had many conversations with, you know, Tom has been predicting this because he's also, as you have, has been in other industries. And the prediction, which is now we're seeing, you know, come to fruition, is that the big, big companies are acquiring the other big companies. So companies in the top 25 are acquiring other companies in the top 25. How do you see that that change will influence the opportunities for owners out there that want to sell and transition, you know, in the very near future?

Nick Rowland

Yeah, it's a. It's a good question. I think you say. first off to your point on. Tom. Yeah, we Sheridan and Empower. Have had. A great relationship with Martin. Health Care. For a number. Of years now. Successfully having met with a handful of private practice groups. So thank you to Tom and tend to you, Paul. Your organization does a great job, you. Know, building that network and advocating. For physical therapy, broadly. Speaking. So we're. Extremely appreciative. Of that. Specifically. You mentioned four states when we. Invested it in power. three years ago, we were only in three. States. And through. Our dialog and our conversations. And the relationships. That Steve and Dave and and Michael and Matt have. Built in in the. Community of our patient. We acquired. two group practices that that you helped support and. Introduced to to. Empower both of them more in Texas. one of them was empty. The other one was Premiere. In the Texas market, and it's allowed us to grow that. Region and affiliate with. Like-minded providers. Looking to. Impact positively the. Outpatient community, similarly to what. We're doing in. Empower, and that is now our. second largest market. From a clinical footprint perspective. And so to. Your to your first. Question around, you know, how is. Consolidation and investment. You know, impacting physical therapy? I would say it's impacting, you know, very, very visibly. I think the number. I most. Recently heard, there. Were 20 physical therapy platforms backed by private equity. I'm sure the number is higher than that. If you get down into some of the. Smaller groups. And they. Are all.

Nick Rowland

Looking to. And have different cultures. Around what they're. Trying to do and know they will be their partnership models. They have JV. Models, they have different equity. Ownership. But I would like to speak that, you know, all of them and I can only speak to shared in. All of them are. Looking. To benefit. From. Scale scale investments. They're looking to. Create a larger. Megaphone to the positive around outpatient and. And the benefits within the health. Care ecosystem. And they're all looking to. Support. Providers. Doing what they do best again, focusing on the patient. And so how will that impact it? You know, I'd say an analog from an investment perspective, as you look at other specialties. Where maybe the consolidation. Occurred. Or started earlier on or. Is at a larger scale. And how has that impacted it? And one that is is commonly referenced is the dental market. And there continues to be large. Scale dental providers across the United States. There is similarly a long tail of opportunity. For continued. Consolidation. And broadly. Speaking, what it does is it creates efficiencies on a number. Of fronts. That positively impact the industry. The first is. The specialization, which we've we've spoken to a number of times and allowing for that provider to invest in. Patient care and. Delivering great quality. And patient care. The second is from. An investment perspective in an alignment perspective allowing. For those entrepreneurs. And providers to. Share in and. Support the growth. From an economic perspective specific to that empower. When we affiliate with a partner. We invite those who own those clinics to invest alongside Sheridan and on alongside our. Management team in owners. Of the entire platform. We create incentive. Structures. Uniquely situated to clinical. Performance. In our normal. Structure, but from a from an ownership. Perspective, we invite folks to sit side by side with us and. Participate in that growth because we sincerely believe in in that alignment and having. A seat at the table and. Continuing to improve and better the industry. And so how will this impact physical therapy. From my. Perspective? I'm an investor. I sincerely believe it is for the better. We see it day to day in the 40 plus clinics that we work with and support. And we're looking to continue. To affiliate. With more like minded. Providers who are looking to do and change the industry for the positive. And so. I think it's a. Significant and very. Exciting time to be both. Working within the industry, investing in industry. And. And improving it and creating a much. Stronger advocacy. For our patients in the in the marketplace and in the government and in. The. Standings within. Health care.

Paul Martin

So, you know, and something that I heard loud and clear, Nick, is, you know, you referenced that there's an opportunity for acquisitions and partnerships. I should say that you guys do that also allows those partners to be investors in the parent company. And I think that I can remember back with Tom and I, as some new companies were coming in and saying, you know, and I'll talk to the audience as well. What is a company like Sheridan and empower going to do different and unique from the other legacy companies that are already there? Because if they just come in and do the same thing and they have the same structures, how are they going to compete with companies that are legacy companies that have been doing this, that have educational programs all built in? And I think Nick Tom tells this story many, many times, and we don't use any names, of course. But in talking to you guys, we were talking to one of our other companies. And Tom said, You know, we have a company that's willing to. Actually, allow this seller to get equity in the parent company. And the acquire look straight at him has said then you should do that deal. I mean, just basically hands up said if they're doing that, we can't beat that. We don't have that capacity. And so I think that is very telling of a true partnership because there's the partnership at the local level. But now you also have up at that parent level where you know, they're cheering for, you know, in order for you guys to do, you know, great partnerships have significant growth. So obviously at the tail end of all this, they're going to benefit too. So I applaud you guys for that and coming in and really doing something different. I'll tell you that there's others out there trying to do the same thing now, Nick, but you guys were certainly at the forefront of that. And you do it very well, and I applaud you for that.

Nick Rowland

Well, thanks, bye. It's it's something that I think, you know. Culture is a buzz. Word. And we talked about the motto at Empower. I think the. Thing that I'll maybe end on from the investor. Perspective. Is, you know. All our partners are are. Different. And so the people. You partner with. And the. Approach. With which they support the teams, there are nuances. And so. I mentioned. Earlier is speaking with Steve, speaking. With Matt. Speaking with Michael. The folks at. Empower who are. Living and breathing day to day. You know that the initiatives and efforts. And value creation. And support. Network that they're creating and empower that that's first and foremost. And then secondly, you know. We are partners arm in arm with with all of our providers in our leadership. Team, and we believe sincerely in that. Alignment. And making sure. That folks. Are on equal. Footing with us. And and. Part of. Building a business, not not a. Clinic. And we look forward to having. Conversations with folks. Who are excited about that, excited about being advocates for outpatient party. And creating, you know, an impact both locally and broadly. And that's, you know, from our. Perspective, the goal. Of investing in why I enjoy what I do every day. At Sheridan. I've been. Very, very fortunate. And pleased and excited to get the opportunity to build and support the teams. At Empower. And we have. Like many, we have a lot that we can do and a. Lot we're working. On and and a lot of excitement about where the. Industry in the business. Is headed. So appreciate those kind of words, Paul, because I think it's it's nice to hear I'm not having the conversations you're having with your potential partners all the time or at the depth. But the fact it. Resonates means a lot. Because it's a very deliberate approach and it's a very sincere approach of how we partner. With our companies.

Paul Martin

Absolutely. Now this has been great and you know, you alluded to that you've enjoyed working with us on a couple of transactions. And I can tell you from our perspective, we also see you guys, you know, at the table with all the other big companies. And you know, you're doing a really good job. You're great to work with. And we have also enjoyed the opportunity to get to know and learn from you guys as well.

Nick Rowland

Thanks, Paul. Well, I think my. Hope is fingers crossed we've got more to. Talk about in. The coming weeks and months.

Paul Martin

Absolutely, Nick. Thank you for your participation today. I really appreciate all the knowledge that you've transferred here, and we really appreciate it. So for any of you out there that have questions on our discussion today, just click below, and that'll prompt me to get in touch with you and any questions you have. And if you would like me to put you through directly through to empower, we'd be more than happy to do that. And I appreciate your time today and I look forward to talking to you in the very near future. Thanks very much.