Contract analysis

I. Executive Summary This memorandum analyzes the potential horizontal and vertical competitive overlaps between Pinnacle Health Systems, Inc. ("Pinnacle" or "PHS") and the existing healthcare portfolio companies of Ardent Capital Partners III LP ("Ardent Capital" or "Fund III") in connection with the Hart-Scott-Rodino ("HSR") premerger notification filing for Ardent Capital's proposed acquisition of 100% of the outs

II. Background A. The Transaction Ardent Capital Partners III LP proposes to acquire 100% of the outstanding equity of Pinnacle Health Systems, Inc. through a stock purchase transaction. The definitive Equity Purchase Agreement was executed on January 31, 2024, by and among Ardent Capital Partners III LP (as Buyer), Veltrano Equity Holdings LLC (as Seller Representative), the individual stockholders of Pinnacle ident

1. Marlowe Asset Management Rehabilitation Holdings LLC — an operator of 74 outpatient physical therapy clinics in Texas, Florida, and Georgia, providing physical therapy, occupational therapy, and related rehabilitation services; and

2. Clearpath Diagnostics Inc. — an independent clinical laboratory services company operating in Pennsylvania, New Jersey, and New York, providing diagnostic testing, pathology, and laboratory analytics services. Fund III's five remaining portfolio companies operate in the business services and specialty industrials sectors and do not participate in any healthcare-related product or geographic markets. Accordingly, t

III. Analytical Framework The competitive overlap analysis set forth in this memorandum is conducted under the framework established by Section 7 of the Clayton Act (15 U.S.C. § 18), the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (15 U.S.C. § 18a) (the "HSR Act"), the implementing regulations promulgated by the FTC at 16 C.F.R. Part 801 et seq., and the 2023 FTC/DOJ Merger Guidelines (the "Merger Guidelines

IV. Analysis of Marlowe Asset Management Rehabilitation Holdings LLC A. Company Overview Marlowe Asset Management Rehabilitation Holdings LLC ("Marlowe Asset Management Rehab") is a Delaware limited liability company with its principal office located at 8950 Westheimer Road, Suite 600, Houston, Texas 77063. Marlowe Asset Management Rehab was acquired by Ardent Capital Partners III LP as a platform investment in June

1. Product Market Definition The threshold question in the horizontal overlap analysis is whether Marlowe Asset Management Rehab and Pinnacle participate in the same relevant product market. For the reasons set forth below, they do not. Marlowe Asset Management Rehab provides outpatient physical therapy and rehabilitation services. These services involve non-surgical, conservative treatment modalities delivered by li

2. Geographic Market Overlap Even assuming, arguendo, that physical therapy services and ambulatory surgical center services were considered to participate in the same relevant product market—which, for the reasons set forth above, they clearly are not—a geographic overlap analysis would be relevant only to the extent that both entities operate in the same geographic markets. Marlowe Asset Management Rehab operates i

1. Nature of the Vertical Relationship Although Marlowe Asset Management Rehab and Pinnacle do not participate in the same relevant product market, a potential vertical relationship exists between the two companies by virtue of their positions at different levels of the healthcare services delivery chain. Specifically, 12 of Marlowe Asset Management Rehab's 74 outpatient physical therapy clinics are co-located with o

2. Competitive Significance Assessment We have assessed the competitive significance of this vertical relationship under the analytical framework applicable to vertical mergers and acquisitions. Based on the following factors, we conclude that the vertical relationship is competitively insignificant and does not raise concerns under Section 7 of the Clayton Act. Referral Volume. The physical therapy referrals from Pi

V. Analysis of Clearpath Diagnostics Inc. A. Company Overview Clearpath Diagnostics Inc. ("Clearpath") is a Delaware corporation with its principal office located at 1700 Market Street, Suite 3400, Philadelphia, Pennsylvania 19103. Clearpath was acquired by Ardent Capital Partners III LP as a platform investment in September 2022 and operates as an independent clinical laboratory services company. Clearpath provides

1. Product Market Definition The product market analysis for Clearpath follows the same analytical framework applied to Marlowe Asset Management Rehab above. Clearpath provides clinical laboratory and diagnostic testing services—a service category that is fundamentally distinct from Pinnacle's ambulatory surgical center and physician practice management services. Clinical laboratory services involve the analysis of b

2. Geographic Market Overlap The geographic overlap analysis for Clearpath is straightforward and dispositive. Clearpath operates exclusively in Pennsylvania, New Jersey, and New York. Pinnacle operates in North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas. There is zero geographic overlap between Clearpath's three-state footprint and Pinnacle's nine-state footprint. No st

VI. Summary of Overlap Analysis Across All Portfolio Companies The following table summarizes the results of the portfolio company overlap analysis for each of Fund III's existing healthcare portfolio companies in relation to the proposed acquisition of Pinnacle Health Systems, Inc.: As reflected in the table above, neither of Fund III's existing healthcare portfolio companies presents a horizontal competitive overla

VII. Implications for HSR Filing The results of this portfolio company overlap analysis have several implications for the preparation and submission of the HSR premerger notification filing for the proposed acquisition of Pinnacle. Items 5–7 Disclosure. The acquiring person's HSR notification form will disclose both Marlowe Asset Management Rehab and Clearpath as entities within the acquiring person's structure that

VIII. Recommendations Based on the analysis set forth in this memorandum, we recommend the following actions:

1. Include Portfolio Company Overlap Discussion in Voluntary Submission. The voluntary submission letter (white paper) to be filed with the FTC on February 16, 2024, should include a concise discussion of the portfolio company overlap analysis, emphasizing the following key points: (a) Outpatient physical therapy and rehabilitation services (Marlowe Asset Management Rehab) and ambulatory surgical center and physician

2. Prepare Summary Chart for Appendix to White Paper. A one-page summary chart, substantially in the form set forth in Section VI of this memorandum, should be prepared and included as an appendix to the white paper for ease of reference by FTC staff. The chart should present the key conclusions of the portfolio company overlap analysis in a clear and accessible tabular format.

3. Include Memorandum in HSR Filing Work File. This memorandum and all supporting documentation, including the facility lists, organizational charts, and competitive analysis materials referenced herein, should be included in the HSR filing work file maintained under Matter No. 1001-00001. This documentation will serve as the evidentiary basis for the portfolio company overlap analysis and will be available for refer

4. Coordinate with Monica Reyes on Broader Competitive Analysis. The analysis contained in this memorandum should be integrated into the broader Market Definition & Competitive Analysis Memorandum that is being prepared by Monica Reyes and is anticipated to be completed by February 10, 2024. In particular, the product market definitions for outpatient physical therapy, clinical laboratory services, and ambulatory sur

IX. Appendices Appendix A — Organizational Structure Chart The following chart depicts the organizational structure of the acquiring person for purposes of the HSR premerger notification filing, including the chain of control from the Ultimate Parent Entity to each portfolio company and the proposed acquisition of Pinnacle Health Systems, Inc.: ARDENT CAPITAL — ORGANIZATIONAL STRUCTURE Level 1 — Ultimate Parent Entit