Alaris Royalty earns nearly 3x money invested in LifeMark Health

Alaris Royalty Corp earned almost triple the money it invested in LifeMark Health, a Canadian physiotherapy- and rehabilitation-services provider acquired by Audax Private Equity in January.

Alaris, a Calgary-based alternative-equity firm, said this month it had redeemed the last of a $74 million investment in LifeMark following the sale to Audax. With that redemption, the firm counted up total proceeds of about $217 million, Alaris President and CEO Steve King told PE Hub Canada.

Alaris first provided financing to Toronto-based LifeMark in December 2004. The investment, which took the form of non-control equity, was used to back a management buyout led by CEO Craig Gattinger from then owner Heritage Partners, a U.S. private-equity firm.

In subsequent years, Alaris made further investments in LifeMark, supporting multiple acquisitions that added to the company’s network of physical-therapy and rehab-treatment clinics. King estimates that 100 clinics entered the network as a result.

Alaris also facilitated LifeMark’s acquisition of MEDIchair, a retailer of home medical equipment, in September 2005.

King said Alaris repeatedly invested in LifeMark because it had an “unbelievable platform” and the ability to sustain strong growth in a highly fragmented industry.

Steve King Alaris Royalty
Steve King, President and CEO, Alaris Royalty Corp

“LifeMark is a classic cash-flow business and a good demographic play given the long-term-health-care needs of our aging population,” King said. “It’s non-cyclical, able to withstand any economic environment, and has a roll-up growth strategy that is very executable.”

In June 2011, LifeMark was acquired by Centric Health Corp for about $215 million. As part of the deal, Centric bought roughly half the stake held by Alaris.

Three years later, Centric began to unload assets to pay down debt, reduce leverage, and strengthen its balance sheet. Divested operations included MEDIchair, which went to Birch Hill Equity Partners in September 2014. A little over a year later, LifeMark itself was sold to Boston-based Audax, prompting the redemption of Alaris’s remaining stake.

Audax bought LifeMark and another Centric unit for about $250 million.

LifeMark was the debut investment of Alaris. Founded by King and Stephen Reid in 2003, the firm specializes in investing risk equity that leaves control of mid-market business partners in the hands of existing owners. Alaris does this by purchasing preferred stock in exchange for monthly dividend distributions that are reset according to a company’s top-line results.

Because of this unique financing structure, Alaris does not rely on exits to generate returns. It is also able to hold stakes for long periods, as it did in the case of LifeMark.

LifeMark was “a huge success for us” and helped “to prove the Alaris investment model,” King said.

Alaris has taken a chunk of the proceeds from this month’s LifeMark redemption and re-invested it. The firm put US$22 million to work in Sandbox, a marketing- and advertising-services provider based in Chicago.

Including Sandbox, the Alaris portfolio currently is composed of 16 Canadian and U.S.-based companies.

Since 2003, Alaris has deployed about $750 million to its deals, King said.

Photo of Steve King courtesy of Alaris Royalty Corp

Photo of physical therapist and patient © Yuri Arcurs/iStock/Getty Images