It’s hump day, hubsters!
Observation: Is it just me, or are more tech- and growth-focused PE firms crossing over and going after pure-play healthcare services companies, albeit high-growth ones a disruptive model or a lot of white space?
A few recent situations support this trend. Yesterday, we saw Great Hill Partners — predominately thought of as investing in growthy technology companies or digital models across different end markets (including a lot of healthcare) — announce its first pure-play healthcare services deal. It made a $100 million growth investment in IVX Health, a national provider of outpatient infusion centers, joining an existing shareholder base that includes Linden Structured Capital.
(To be fair, it’s not the first time the Boston PE firm dipped its toes outside of the box that people perceive it to be in, having previously owned medical devices company SteriMed.)
Earlier this year, tech buyout behemoth Silver Lake partnered with EQT and Nestle to make an aggregate investment of €3.5 billion ($3.62 billion) in IVC Evidensia. The investment assigned Europe’s largest veterinary services company an enterprise value of approximately €12.3 billion. According to Reuters, the deal valued IVC at almost 30 times forward EBITDA.
“All of these tech and retail guys are looking for other sectors they can leverage expertise with one way or another,” one healthcare investment banker told me. For example, there are some parties in the sale process for Vohra Wound Physicians that fit that playbook, I wrote yesterday. In a competitive deal environment where having an angle is increasingly important, having that tech lens could give a buyer an edge up on competition in certain situations, I’m told.
Four sources have told me that another prominent technology investor has participated in recent large-scale healthcare services processes, but we’ve yet to see this firm strike.
This firm is “trying to figure out how to play healthcare but with no reimbursement risk — so they have to look at dental, derm and vision,” one source said. “Growth investors are not afraid to pay a big price, [but] institutionally they are going to have to get comfortable with some level of reimbursement risk.”
Is the rationale as simple as many private equity firms are chasing growth, and in chasing growth they land in healthcare — thus widening their mandates? After all, funds keep raking in more capital and have a lot of dry powder to put to work. What other examples have you seen?
Have a great day, everybody! As always, write to me at firstname.lastname@example.org with any comments, tips or just to say hello!