Echo Healthcare Acquisition Corp, a so-called Special Purpose Acquisition Company (SPAC) that raised USD 57.5m in an IPO at the end of March, is seeking to acquire a privately held healthcare company in a reverse merger.

Echo's "first platform deal" will be for a company valued at a minimum of USD 45m, which represents just under 80% of the funds in Echo's IPO trust-fund coffers, according to New York-based financier Richard Dorfman, who is acting as an acquisition advisor to Joel Kanter, president of Echo. The USD 45m amount is mandated under the terms of the SPAC, but the prospective deal could range from USD 50m to USD 200m, he added.

The acquired privately held company then will become public, and additional acquisitions could follow, according to the Echo scenario. "Our perfect scenario is a really attractive, sizeable, high-growth, privately held healthcare company" that could be acquired for stock, according to Dorfman. "Then we could hold on to that USD 57m if possible, so that the new merged entity can then use that money and the publicly traded stock that it will have to ... do further deals. That doesn't mean we wouldn't use some of that [IPO] capital to close the deal," he added.

Potential targets are in the healthcare services, healthcare facilities, diagnostics and medical equipment arenas, Dorfman said. "We would like to do it domestically, but if there's a really attractive deal we have the ability to go overseas," Dorfman said.

Dorfman, known primarily as a media and information-services investor, said he is involved as an advisor to Echo because of his long-standing friendship with Kanter, who is an investor in several healthcare companies, and also president of private investment company Windy City Inc., based in Vienna, Virginia. The other Echo principals are medical and healthcare industry veterans, with interests in pharmaceutical providers, nursing care providers and medical equipment companies, among others.

The current interests of the Echo principals include some privately held companies that seem to fit the Echo acquisition profile. "There are those that you're correct about," Windy City's Kanter replied in response to a question, "because ultimately the company does want to be public, would love to get a chance at the capital, is perfectly open to a change in structure and governance.... But those are few and far between."

Most of the companies that the Echo principals are involved with either are too small to fit the profile or "have a different view" about a potential exit, Kanter added.

Possibilities include Pensacola, Florida-based Baptist Health Care Corporation, a nonprofit that operates hospitals, and privately held, Atlanta-based Mariner Health Care, which operates nursing facilities, though Kanter declined to say if they were under consideration. Echo already has considered one other nonprofit, in Washington state, Kanter said, declining to identify it or any of the other approximately ten companies that Echo currently has under active consideration. Echo thus far has received information on some 100 companies in all, Kanter noted, and hopes to conclude its first acquisition within a year of the IPO date.

The greater likelihood is that Echo's first acquisition will be on the "services side," Kanter said, rather than on the devices or diagnostics side.

by Louis Chunovic