PE Hub’s ongoing series on private equity firms investing in healthcare continues with insights from Brendyn Grimaldi, managing director, Berenson Capital. Founded in 2016 as the private equity arm of merchant bank Berenson, the PE group backs software and tech-enabled services businesses. To date, the firm has made one acquisition in the healthcare sector.
Grimaldi joined the firm as a principal in 2020 and was promoted to managing director in 2021. He is involved in all aspects of investment origination and execution. Prior to joining Berenson, Grimaldi was a principal at Halyard Capital, a mid-market private equity firm focused on tech-enabled business services. Previously, he was an analyst at Credit Suisse and JP Morgan Asset Management.
Berenson Capital seeks to invest in companies that are solving healthcare problems with technology.
“There are still areas where hospitals aren’t leveraging technology, and that’s a big problem,” Grimaldi said. “One example is patient safety within the hospital setting. If you ask a group of chief nursing officers what their biggest challenges are, more often than not, on the list of the top three challenges, are patient falls,” Grimaldi told PE Hub. “The cost of patient falls is profound. Once a patient falls, it changes their care plan and negatively impacts quality of life. It changes everything.”
It is also bad news for the facility. Once someone falls, any care associated with the fall (x-rays, surgeries, extended stay) is not reimbursable, so it is very economically punitive for the facilities.
Grimaldi noted that most of the market is still addressing falls with “old school” tactics, such as non-skid socks.
A common practice is to station an aid in a patient’s room for round-the-clock monitoring. But, studies have shown that the practice does not have a significant impact on reducing falls. Plus, it’s a labor-intensive, expensive approach.
“This is an example of an area where we focus – those technology-deficient pockets.”
Last year, Berenson invested in Interactive Digital Solutions, which developed MedSitter, a remote patient monitoring (RPM) platform that observes patients most at risk for falls. It’s a cloud-based software application that allows one person to sit at a central location and monitor eight to 10 patients simultaneously. Since the acquisition, Berenson made MedSitter a separate company.
“The observer can intervene and interact with the patient when the system tells them they are moving or increasing the risk of a fall,” he said. “If the observer can’t intervene, with a click of a button, a person is notified or is able to take preventative measures like going into the room and stop a fall before it happens.”
This capability allows hospitals to reduce the cost of monitoring patients at risk for falling, and it has been shown to reduce the number of falls that happen within the hospital setting – creating cost savings across the board, according to Grimaldi.
One other key trend the firm is seeing in healthcare is providers trying new models to combat an acute staffing shortage.
“There has been an explosion of telehealth to try to address this issue; but you also have clinicians within the hospital evaluating their care delivery models to see how they can leverage video technology to extend the coverage of their existing staff,” he said. “We think this is an alternative use case for MedSitter where the company can be helpful to its clients.”
Berenson views MedSitter as a platform investment and is looking to expand capabilities and seeking potential add-on acquisitions in the future.
“There are a number of growth verticals, and we view MedSitter as a platform in a number of ways,” he said. “Within the hospital setting, there are more things the MedSitter platform could be monitoring. Has the patient moved; are they going to get bed sores? Are they staying hydrated? There are numerous other clinical indicators that can be monitored with motion or a device on a patient to intake a lot of variables.”
The firm also wants to expand MedSitter into other settings, like long-term care and nursing homes – areas in which growth can occur organically and/or through acquiring complementary businesses.
“Behavioral health is another space we are very active in, as it fits the theme of pockets within healthcare that aren’t utilizing technology enough,” he said. “It is ripe for disruption, particularly with respect to data that allows for tracking patient progress and outcomes, as well the administrative side on the revenue cycle.”
Why healthcare investing in attractive
“The macros are well known, as [healthcare] is an enormous market, a multi-trillion-dollar market, and it represents roughly 20 percent of GDP,” he said. “No one spends more on healthcare than the US, but it is still sub-optimized. There is lots of room for improvement, as metrics like life expectancy in the US are still lagging many developed countries in that metric.”
He noted the sector is still behind other vertical markets in terms of technology adoption, despite the strides over the last 10 to 15 years.
“There are many pockets within healthcare still relying on paper-based processes or people-based processes, and those are opportunities for disruption with technology,” he said.
“We maintain a concentrated portfolio and doing so allows our team the availability to be active investors,” he said. “We are not day-to-day operators and invest behind passionate and talented management teams, and we trust them to run the business, but we try to bring our resources in when we can.”
The firm likes to appoint one of its operating executes to be the executive chair of the company, and that person’s objective is to actively partner with management and take a hands-on approach to guide the most strategic initiatives to drive value creation.
“These people have proven track records of scaling businesses in relevant companies,” he said. “In most of our transactions, the sellers are rolling forward meaningful equity in the go-forward deal, so they are focused on finding the right partner to help them dramatically accelerate the growth of the business.”
The firm also has an M&A advisory practice that has been around for over 30 years. The advisory practice has an extensive network of relationships that allows Berenson Capital to make strategic introductions to portfolio companies, Grimaldi said.
Launched in 2016, Berenson Capital is the private equity arm of Berenson, a New York City-based merchant bank founded in 1990. Berenson Capital typically seeks buyout or growth equity and works with founders to determine the mix. The firm does most business in the US and Canada and seeks control or significant minority ownership. The firm is focused on the lower end of the mid-market, investing in businesses that have between $5 million and $50 million of recurring revenue.
“We underwrite to a five-year plan and there are a number of levers of growth to be pursued, and a long-term time frame provides the necessary runway to drive strategic value,” he said. “To the extent the market changes and we can exit early with a very good outcome, we will evaluate that, but we are long-term investors. Three years is on the short end, and five years is more typical, and we will hold it longer if needed.”
The firm’s typical exit is a sale to a strategic buyer or a larger PE firm.